Approximate
date of commencement of proposed sale to the public: As soon as practicable after the effective date of this Registration Statement.

If any of the securities being registered on this Form are to be offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ¨

If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

If this Form is a post-effective amendment filed pursuant to Rule 462(d) under the Securities Act, check the following
box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.

Large accelerated filer

¨

Accelerated filer

¨

Non-accelerated filer

x (Do not check if a smaller reporting
company)

Smaller reporting company

¨

(Continued on next page)

(Continued from previous page)

CALCULATION OF REGISTRATION FEE

Title of Each Class of

Securities to be Registered

Proposed MaximumAggregateOffering Price(1)

Amount ofRegistration Fee(2)

Common Stock, $0.001 par value per share

$96,600,000

$

6,888

(1)

Estimated solely for the purpose of calculating the amount of the registration fee in accordance with Rule 457(o) under the Securities Act of 1933, as amended.
Includes the offering price of additional shares that the underwriters have the option to purchase.

(2)

Of this amount, the Registrant previously paid $6,417 in connection with this Registration Statement on Form S-1, Registration No. 333-169210, filed on September 3,
2010, as amended.

The Registrant hereby amends this Registration Statement on such date or dates as may be necessary to delay its effective date until
the Registrant shall file a further amendment which specifically states that this Registration Statement shall thereafter become effective in accordance with Section 8(a) of the Securities Act of 1933 or until the Registration Statement
shall become effective on such date as the Commission, acting pursuant to said Section 8(a), may determine.

The
information in this preliminary prospectus is not complete and may be changed. These securities may not be sold until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an
offer to sell nor does it seek an offer to buy these securities in any state or other jurisdiction where the offer or sale is not permitted.

PROSPECTUS

SUBJECT TO COMPLETION, DATED NOVEMBER 4, 2010

6,000,000 Shares

Common Stock

This is an initial public offering of Zogenix, Inc. We are offering 6,000,000 shares of our common stock. We currently estimate that the initial
public offering price of our common stock will be between $12.00 and $14.00 per share.

Prior to this offering there has been no public
market for our common stock. We have filed an application for our common stock to be listed on The NASDAQ Global Market under the symbol ZGNX.

We have granted the underwriters an option to purchase up to 900,000 additional shares of our common stock to cover over-allotments, if any, exercisable at any time until 30 days after the date of this
prospectus.

Entities affiliated with certain of our current stockholders have indicated an interest in purchasing an aggregate of
approximately $15.0 million of shares of our common stock in this offering. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, less or no shares in this
offering to any of these entities, or any of these entities may determine to purchase more, less or no shares in this offering. The underwriters will receive an underwriting discount and commission of 3.5% on any sales of shares to these entities.

Neither the Securities and Exchange Commission nor any state securities commission has approved or disapproved of these securities or
passed upon the adequacy or accuracy of this prospectus. Any representation to the contrary is a criminal offense.

The underwriters
expect to deliver the shares on or about , 2010.

Wells Fargo Securities

Leerink Swann

Oppenheimer & Co.

Stifel Nicolaus Weisel

Prospectus dated
, 2010.

We launched our first product, SumavelDosePro, using our proprietary DosePro technology in January 2010.

You should rely only on the
information contained in this prospectus and in any free writing prospectus that we may provide to you in connection with this offering. Neither we nor any of the underwriters has authorized anyone to provide you with information different from, or
in addition to, that contained in this prospectus or any such free writing prospectus. If anyone provides you with different or inconsistent information, you should not rely on it. Neither we nor any of the underwriters is making an offer to sell or
seeking offers to buy these securities in any jurisdiction where or to any person to whom the offer or sale is not permitted. The information in this prospectus is accurate only as of the date on the front cover of this prospectus and the
information in any free writing prospectus that we may provide you in connection with this offering is accurate only as of the date of that free writing prospectus. Our business, financial condition, results of operations and prospects may have
changed since those dates.

For investors outside the United States: Neither we nor any of the underwriters has done anything
that would permit this offering or possession or distribution of this prospectus or any free writing prospectus we may provide to you in connection with this offering in any jurisdiction where action for that purpose is required, other than in the
United States. You are required to inform yourselves about and to observe any restrictions relating to this offering and the distribution of this prospectus and any such free writing prospectus outside of the United States.

i

PROSPECTUS SUMMARY

This summary does not contain all of the information you should consider before buying shares of our common stock. You should read the entire prospectus carefully, especially the Risk
Factors section and our financial statements and the related notes appearing at the end of this prospectus, before deciding to invest in shares of our common stock. Unless the context requires otherwise, references in this prospectus to
Zogenix, we, us and our refer to Zogenix, Inc., including, as of June 7, 2010, its consolidated subsidiary.

Overview

We are a pharmaceutical company commercializing and developing
products for the treatment of central nervous system disorders and pain. Our first commercial product, Sumavel DosePro (sumatriptan injection) Needle-free Delivery System, was launched in January 2010. Sumavel DosePro offers
fast-acting, easy-to-use, needle-free subcutaneous administration of sumatriptan for the acute treatment of migraine and cluster headache in a pre-filled, single-use delivery system. Sumavel DosePro is the first drug product approved by the
U.S. Food and Drug Administration, or FDA, that allows for the needle-free, subcutaneous delivery of medication. Our lead product candidate, ZX002, is a novel, oral, single-entity controlled-release formulation of hydrocodone currently in
Phase 3 clinical trials for the treatment of moderate to severe chronic pain in patients requiring around-the-clock opioid therapy. Sumavel DosePro and ZX002 each has the potential to address significant unmet medical needs and become important and
widely-used additions to the treatment options available to patients and physicians in the United States multi-billion dollar migraine and chronic pain markets, respectively.

Sumavel DosePro may offer a faster-acting and more efficacious treatment alternative to oral and nasal triptans and simple, convenient
administration when compared to traditional, needle-based sumatriptan injection. According to its Prescribing Information, Sumavel DosePro can provide onset of migraine pain relief in as little as ten minutes for some patients. As a result,
we believe that Sumavel DosePro has the potential to be prescribed by a broad physician audience, especially for difficult to treat migraine episodes.

Migraine is a syndrome that affects approximately 30 million people in the United States, according to a 2010 National Headache Foundation press release. Triptans are the class of drugs most often
prescribed for treating migraines. In the United States in the 12 months ended June 2010, triptans generated sales of approximately $3.45 billion and sumatriptan, including branded and generic forms, represented the biggest market share
of the seven approved triptans, with sales of approximately $1.97 billion, according to Wolters Kluwer Pharma Solutions
(Source® PHAST Institution/Retail).

We launched the commercial sale of Sumavel DosePro in the United States in January 2010 with our co-promotion partner, Astellas Pharma US, Inc., or Astellas. Our sales and marketing organization is
comprised of approximately 100 professionals. Our field sales force of approximately 80 representatives is promoting Sumavel DosePro primarily to neurologists and other key prescribers of migraine medications, including headache clinics and headache
specialists. Our promotional efforts are complemented by our collaboration with Astellas and approximately 400 of its sales representatives, who are promoting Sumavel DosePro primarily to primary care physicians, OB/GYNs, emergency medicine
physicians and urologists in the United States. We also have entered into a partnership for Sumavel DosePro with Desitin Arzneimittel GmbH to accelerate development and regulatory approvals in Europe and further enhance the global commercial
potential of Sumavel DosePro.

Sumavel DosePro has demonstrated consistent monthly growth in total prescriptions since its
launch in January 2010. The product continues to add new and repeat prescribers in both the neurology and primary care settings, including a significant number of prescribers who had not prescribed needle-based sumatriptan injection in the
prior 12 months. The product is gaining use from a range of

1

patient segments, including new triptan users, patients being converted to the product from other migraine drugs and patients who have been prescribed Sumavel DosePro and also have other triptan
prescriptions. This experience is consistent with our belief that many patients will selectively use Sumavel DosePro for their more challenging migraine episodes, while continuing to use oral triptans to treat their less severe migraine episodes.
Through our ongoing efforts with the largest commercial health plans, Sumavel DosePro is achieving broad coverage in the United States, with a reimbursement claims approval rate of approximately 78% since launch (Source® Dynamic Claims January 2010  August 2010). Total gross sales of Sumavel DosePro through September 30,
2010 were $16.4 million. For the same period, we recognized $11.8 million in net product revenue from these sales, represented by more than 21,800 aggregate dispensed prescriptions. Weekly prescribing data shows that more than 5,600 physicians have
prescribed Sumavel DosePro. (Source® PHAST Retail January 2010  September 2010 and Source® LaunchTrac week ended January 15, 2010  week ended October 1, 2010)

Our lead product candidate, ZX002, is a novel, oral, single-entity controlled-release formulation of
hydrocodone currently in Phase 3 clinical trials for the treatment of moderate to severe chronic pain in patients requiring around-the-clock opioid therapy. ZX002 utilizes Elan Pharma International Limiteds, or Elans, proprietary
Spheroidal Oral Drug Absorption System, or SODAS® Technology, which serves to enhance the release profile of
hydrocodone to provide consistent 12-hour pain relief relative to existing immediate-release combination formulations. Most marketed hydrocodone products contain the analgesic combination ingredient acetaminophen, which if taken
in high quantities over time can cause liver toxicity. In June 2009, the FDA organized a joint advisory committee meeting that highlighted the public health problem of liver injury related to the use of acetaminophen in both over-the-counter
and prescription products. ZX002, if approved, may represent the first available controlled-release version of hydrocodone and also the first hydrocodone product that is not combined with another analgesic. As a result, we believe
ZX002 could generate sales from both patients who are using immediate-release opioid products on a chronic basis and patients already using extended-release opioids. We initiated the Phase 3 clinical development program for ZX002 in March 2010 and,
if successful, expect to submit a New Drug Application with the FDA by early 2012. We in-licensed exclusive U.S. rights to ZX002 from Elan in 2007.

The American Pain Society estimated in 1999 that 9% of the U.S. adult population suffers from moderate to severe non-cancer related chronic pain. Chronic pain can be treated with both immediate-release
and extended-release opioids. We define our target market for ZX002 as prescription, non-injectable codeine-based and extended-release morphine-based pain products. This market generated U.S. sales of approximately $13.0 billion
for the 12 months ended June 2010, based on average wholesale price, on approximately 202 million prescriptions. During the same period, existing hydrocodone products, the most commonly prescribed pharmaceutical products in the United
States, generated $3.1 billion in sales on approximately 126 million prescriptions. (Source® PHAST
Retail). We believe ZX002 has the potential to be an important therapeutic alternative to existing hydrocodone products, including the branded product Vicodin and its generic equivalents.

Our DosePro technology is a novel, patent-protected, needle-free drug delivery system designed for self-administration of a pre-filled,
single dose of liquid drug. We believe the FDAs approval of Sumavel DosePro represents an important validation of the technology. Results from our pre-clinical and clinical studies demonstrate that DosePro can be used successfully with small
molecules and biological products, including protein therapeutics and monoclonal antibodies. We are building our internal product pipeline by investigating proven drugs that can be paired with DosePro to enhance their benefits and commercial
attractiveness. Specifically, we have initiated pre-clinical development on a proprietary long-acting formulation of an injectable central nervous system, or CNS, drug product and are also evaluating the market potential, formulation requirements
and clinical development pathway of an additional CNS compound that could be paired with DosePro to enhance its commercial

2

attractiveness. If these efforts are successful, we may be able to submit an Investigational New Drug Application for one or both product candidates in 2011. We are also seeking to capitalize on
our DosePro technology by out-licensing it to potential partners enabling them to enhance, differentiate or extend the life cycle of their proprietary injectable products. We acquired the DosePro technology and related intellectual property from
Aradigm Corporation in August 2006.

Our management team has a proven clinical, regulatory, business development and
commercialization track record at Zogenix and prior organizations, as well as significant expertise in CNS disorders and pain. Since our inception in 2006, our management team has successfully acquired, developed, obtained regulatory approval for
and launched the commercial sale of Sumavel DosePro and completed a significant primary care co-promotion agreement in the United States and secured a European partnership for the product. We also completed an in-licensing transaction and initiated
Phase 3 development for our ZX002 product candidate.

Sumavel DosePro Market Experience to Date

Selected market highlights since we launched Sumavel DosePro in January 2010 include:



Prescription Trends. Monthly prescription data shows that more than 21,800 aggregate prescriptions of Sumavel DosePro
have been dispensed and that monthly total prescriptions have increased in each month since launch. In September 2010, more than 3,500 total prescriptions were dispensed and nearly 31% of total prescriptions were classified as refill prescriptions.
(Source® PHAST Retail January 2010  September 2010)



Prescriber Base. Weekly prescribing data shows that more than 5,600 physicians have prescribed Sumavel DosePro, of
whom a growing proportion are now repeat prescribers (Source LaunchTrac week ended January 15, 2010  week ended October 1, 2010). In addition, 32% of Sumavel DosePro prescribers had not written a prescription for needle-based
sumatriptan injection in the previous 12 months and an additional 35% of prescribers had written, on average, less than one prescription per month for needle-based sumatriptan injection. (Source® LaunchTrac week ended January 15, 2010  week ended July 30, 2010)



Patient Dynamics. Analysis of patient data indicates that approximately 34% of patients filling a Sumavel DosePro
prescription were new to the triptan market (i.e., had not filled a triptan prescription in the prior 18 months), approximately 34% had active prescriptions for Sumavel DosePro and at least one additional triptan and approximately 16% of patients
had converted to Sumavel DosePro from another triptan. The remaining approximately 16% of patients were continuing users of Sumavel DosePro. Importantly, of the patients who converted from another triptan, 77% converted from oral triptans, including
tablets and melt formulations. (Source® Lx PTA January 2010  August 2010)



Patients Experience. Patients experience with Sumavel DosePro has been positive based on feedback provided
via the Connects Program from Infomedics. This internet-based program invites patients that received a Sumavel DosePro prescription to register online at the time of their prescription and then provide feedback after they have used the product to
treat a migraine episode. Through September 11, 2010, 1,071 patient respondents who had used Sumavel DosePro have rated their satisfaction with Sumavel DosePro at an average score of 7.1 versus 5.5 for their prior migraine medication (9-point
satisfaction scale, with 9 being very satisfied).

3

Investment
Highlights

We believe we are differentiated by the unique characteristics of our marketed product and late stage product
candidate, each of which addresses large market opportunities, as well as our established commercial infrastructure, our innovative technology and the depth of experience of our management team. The following represents the key attributes that help
differentiate our company:



Fully-integrated pharmaceutical company with established commercial infrastructure.



Sumavel DosePro, a differentiated new entrant in the migraine market that has demonstrated consistent monthly prescription growth since its launch.

Our business and our ability to execute our business strategy are subject to a number of risks that you should be aware of before you
decide to buy our common stock. In particular, you should consider the following risks, which are discussed more fully in Risk Factors:



We are largely dependent on the commercial success of Sumavel DosePro. Through September 30, 2010, we have only recognized $11.8 million in net
product revenue from sales of Sumavel DosePro, and we may never significantly increase these sales or become profitable.



We are at an early stage of commercialization and have incurred significant net losses since our inception and anticipate that we will incur continued
net losses for at least the next several years. Our net loss applicable to common stockholders was $46.0 million in 2007, $45.6 million in 2008, $45.9 million in 2009 and $71.4 million for the nine months ended September 30, 2010.



We may not be successful in executing our sales and marketing strategy for the commercialization of Sumavel DosePro. As part of this strategy, we are
dependent on our collaboration with Astellas to promote Sumavel DosePro primarily to primary care physicians, OB/GYNs, emergency medicine physicians and urologists. If we are unable to successfully execute such strategy, we may not be able to
generate significant revenue.

4



We expect intense competition, including from generic products, and if our competitors market and/or develop treatments for migraine or pain that are
marketed more effectively, approved more quickly than our product candidates or demonstrated to be safer or more effective than our products, our commercial opportunities may be reduced or eliminated.



We are dependent on numerous third parties in our supply chain, all of which are currently single source suppliers, for the commercial supply of
Sumavel DosePro and a sole source supplier for the clinical supply of ZX002, and if we experience problems with any of these suppliers, the manufacturing of Sumavel DosePro and ZX002 could be delayed.



ZX002 is subject to extensive regulation, and we cannot give any assurance that it or any of our other product candidates will receive regulatory
approval or be successfully commercialized.



Our clinical trials may fail to demonstrate acceptable levels of safety and efficacy of ZX002 or any of our other product candidates, which could
prevent or significantly delay their regulatory approval.



Delays in the commencement or completion of clinical testing for ZX002 or pre-clinical or clinical testing for our other product candidates could
result in increased costs to us and delay or limit our ability to pursue regulatory approval for, or generate additional revenues from, such product candidates.



Our success depends in part on our ability to protect our intellectual property. It may be difficult and costly to protect our proprietary rights and
technology, and we may not be able to ensure their protection.



We may encounter unexpected safety, manufacturing, supply, regulatory or other issues relating to Sumavel DosePro, which may limit its commercial sales
or regulatory acceptance.

Company Information

We were formed as a Delaware corporation on May 11, 2006 as SJ2 Therapeutics, Inc. We commenced our operations on
August 25, 2006 and changed our name to Zogenix, Inc. on August 28, 2006. Our principal executive offices are located at 12671 High Bluff Drive, Suite 200, San Diego, CA 92130, and our telephone number is 1-866-ZOGENIX
(1-866-964-3649). We formed a wholly-owned subsidiary, Zogenix Europe Limited, in June 2010, a company organized under the laws of England and Wales and which is located in the United Kingdom, and whose principal operations are to support the
manufacture of the DosePro technology. Our website address is www.zogenix.com. The information on, or accessible through, our website is not part of this prospectus.

We intend to use the net proceeds from this offering to fund Phase 3 clinical trials and related development activities for ZX002, to fund the ongoing commercialization of Sumavel DosePro and
for working capital and other general corporate purposes.

Risk factors

You should read the Risk Factors section of this prospectus for a discussion of the factors to consider carefully before deciding to purchase any shares of our common stock.

Proposed Nasdaq Global Market symbol

ZGNX

The number of shares of common stock to be
outstanding after this offering set forth above includes:



15,690,046 shares outstanding as of September 30, 2010, after giving effect to the conversion of all outstanding shares of our convertible
preferred stock into 14,239,797 shares of common stock upon completion of this offering;



the issuance of 198,575 shares of common stock as a result of the expected net exercise of outstanding warrants, or the Series B Warrants, in
connection with the completion of this offering, assuming an initial public offering price of $13.00 per share (the mid-point of the price range set forth on the cover page of this preliminary prospectus), which Series B Warrants will terminate if
unexercised prior to the completion of this offering; and



the issuance of 1,190,763 shares of our common stock upon completion of this offering as a result of the automatic conversion of the $15.0 million in
aggregate principal amount of convertible promissory notes we issued in July 2010, or the 2010 Notes (including accrued interest thereon), assuming an initial public offering price of $13.00 per share (the mid-point of the price range set forth on
the cover page of this preliminary prospectus) and assuming the conversion occurs on November 23, 2010 (the expected closing date of this offering).

Because the number of shares that will be issued upon exercise of the Series B Warrants and upon conversion of the 2010 Notes depends
upon the initial public offering price per share in this offering and, in the case of the 2010 Notes, the closing date of this offering, the actual number of shares issuable upon such exercise and conversion will likely differ from the respective
number of shares set forth above.

The number of shares of common stock to be outstanding after this offering set forth above
excludes:



256,816 shares of common stock issuable upon the exercise of warrants outstanding as of September 30, 2010, at a weighted average exercise price
of $10.92 per share, which warrants are expected to remain outstanding upon completion of this offering;



1,482,780 shares of common stock issuable upon the exercise of options outstanding as of September 30, 2010, at a weighted average exercise price
of $3.36 per share;

6



2,000,000 additional shares of common stock reserved for future issuance under our 2010 Equity Incentive Award Plan, or the 2010 Plan, which will
become effective immediately prior to the completion of this offering, plus 233,689 shares of common stock reserved for future grant or issuance under our 2006 Equity Incentive Plan, or the 2006 Plan, as of September 30, 2010, which shares will
be added to the shares to be reserved under our 2010 Plan upon the effectiveness of the 2010 Plan, plus any annual increases in the number of shares of common stock reserved for future issuance under the 2010 Plan pursuant to an evergreen
provision and any other shares that may become issuable under the 2010 Plan pursuant to its terms, as more fully described in Compensation Discussion and Analysis  Employee Equity Incentive Plans  2010 Equity Incentive Award
Plan; and



500,000 shares of common stock reserved for issuance under our 2010 Employee Stock Purchase Plan, or the Purchase Plan, which will become effective
following the completion of this offering, plus any annual increases in the number of shares of common stock reserved for issuance under the Purchase Plan pursuant to an evergreen provision, as more fully described in Compensation
Discussion and Analysis  Employee Equity Incentive Plans  2010 Employee Stock Purchase Plan.

Except as otherwise indicated, all information in this prospectus assumes or gives effect to:



no exercise by the underwriters of their option to purchase up to an additional 900,000 shares of common stock to cover over-allotments, if any;



the purchase of $15.0 million of shares of our common stock in this offering by our current stockholders as described below;



the filing of our amended and restated certificate of incorporation and adoption of our amended and restated bylaws upon completion of this offering;



the conversion of all outstanding shares of our convertible preferred stock into 14,239,797 shares of common stock upon completion of this offering;



no exercise of outstanding options or warrants (other than the Series B Warrants) since September 30, 2010; and



a one-for-ten reverse stock split of our common stock effected in November 2010.

A $1.00 increase in the assumed initial public offering price of $13.00 per share (the mid-point of the price range set forth on the
cover page of this preliminary prospectus) would increase the number of shares of our common stock issued upon the exercise of the Series B Warrants (and therefore the number of shares to be outstanding after this offering) by 78,026 shares. A $1.00
decrease in the assumed initial public offering price of $13.00 per share (the mid-point of the price range set forth on the cover page of this preliminary prospectus) would decrease the number of shares of our common stock issued upon the exercise
of the Series B Warrants (and therefore the number of shares to be outstanding after this offering) by 91,028 shares.

A $1.00
increase in the assumed initial public offering price of $13.00 per share (the mid-point of the price range set forth on the cover page of this preliminary prospectus) would decrease the number of shares of our common stock issued on conversion of
the 2010 Notes (and therefore the number of shares to be outstanding after this offering) by 85,056 shares, assuming that the closing date of this offering (and therefore the conversion date of the 2010 Notes) is November 23, 2010. A $1.00 decrease
in the assumed initial public offering price of $13.00 per share (the mid-point of the price range set forth on the cover page of this preliminary prospectus) would increase the number of shares of our common stock issued on conversion of the 2010
Notes (and therefore the number of shares to be outstanding after this offering) by 99,231 shares, assuming that the closing date of this offering (and therefore the conversion date of the 2010 Notes) is November 23, 2010. To the extent the closing
date of this offering

7

occurs after November 23, 2010, the 2010 Notes will continue to accrue interest at a rate of 8% per annum and additional shares of our common stock will be issued upon conversion of this
additional accrued interest. Likewise, if the closing date occurs prior to November 23, 2010, fewer shares will be issued on conversion of the 2010 Notes.

Entities affiliated with Abingworth Bioventures, Chicago Growth Partners II, L.P., Clarus Lifesciences I, L.P., Domain Associates, L.L.C., Scale Venture Partners II, LP and Thomas, McNerney
& Partners, L.P., each of which is a current stockholder, have indicated an interest in purchasing an aggregate of approximately $15.0 million of shares of our common stock in this offering, to be allocated pro rata among them based on each
entitys affiliates current beneficial ownership of our outstanding capital stock. However, because indications of interest are not binding agreements or commitments to purchase, the underwriters may determine to sell more, less or no
shares in this offering to any of these entities, or any of these entities may determine to purchase more, less or no shares in this offering. The underwriters will receive an underwriting discount and commission of 3.5% on any sales of shares to
these entities.

8

Summary
Financial Data

The following table summarizes certain of our financial data. The summary statement of operations data for
the years ended December 31, 2007, 2008 and 2009 are derived from our audited financial statements included elsewhere in this prospectus. The summary statement of operations data for the nine months ended September 30, 2009 and 2010 and the
balance sheet data as of September 30, 2010 have been derived from our unaudited interim financial statements, which are included elsewhere in this prospectus. The unaudited interim financial statements have been prepared on the same basis as the
audited financial statements and, in the opinion of management, reflect all adjustments, consisting primarily of normal recurring adjustments, necessary to fairly present our financial position as of September 30, 2010 and results of operations for
the nine months ended September 30, 2009 and 2010. Our historical results of operations and financial condition are not necessarily indicative of the results or financial condition that may be expected in the future. The summary financial data set
forth below should be read together with our financial statements and related notes, Selected Financial Data and Managements Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in
this prospectus.

Year Ended December 31,

Nine Months EndedSeptember 30,

2007

2008

2009

2009

2010

(In Thousands, Except Per Share Amounts)

Statement of Operations Data

Revenue:

Net product revenue

$



$



$



$



$

11,828

Contract revenue









2,810

Total revenue









14,638

Operating expenses:

Cost of sales









9,403

Royalty expense









598

Research and development

24,329

33,910

21,438

22,305

19,394

Selling, general and administrative

4,725

11,820

14,102

8,027

36,792

Total operating expenses

29,054

45,730

35,540

30,332

66,187

Loss from operations

(29,054

)

(45,730

)

(35,540

)

(30,332

)

(51,549

)

Other income (expense):

Interest income

927

696

10

7

4

Interest expense

(377

)

(1,718

)

(9,188

)

(8,563

)

(6,938

)

Change in fair value of warrant liability

(107

)

1,119

(755

)

(505

)

(12,833

)

Other financing income

906









Other income (expense)

25

63

(416

)

(350

)

(113

)

Total other income (expense)

1,374

160

(10,349

)

(9,411

)

(19,880

)

Net loss

(27,680

)

(45,570

)

(45,889

)

(39,743

)

(71,429

)

Deemed dividend for the beneficial conversion on Series A-1 and Series A-2 convertible preferred stock

See Note 2 of Notes to Financial Statements for an explanation of the method used to calculate net loss per share and the number of shares used in the computation
of the per share amounts.

9

As of September 30, 2010

Actual

Pro FormaAs Adjusted

(In Thousands)

Balance Sheet Data:

Cash and cash equivalents

$

11,673

$

82,089

Working capital (deficit)

(920

)

80,686

Total assets

55,034

123,944

Long-term debt, less current portion

22,390

22,390

Convertible preferred stock warrant liability

20,301



Convertible preferred stock

149,312



Accumulated deficit

(195,967

)

(195,967

)

Total stockholders equity (deficit)

(183,780

)

65,933

The summary pro
forma as adjusted balance sheet data above gives effect to the following transactions as if they had occurred as of September 30, 2010:

(1) the sale of 6,000,000 shares of common stock in this offering and our receipt of the estimated net proceeds therefrom, based on an assumed initial public offering price of
$13.00 per share (the mid-point of the price range set forth on the cover page of this preliminary prospectus) and after deducting the estimated underwriting discounts and commissions and estimated offering costs payable by us;

(2) the conversion of all outstanding shares of our convertible preferred stock into 14,239,797
shares of our common stock upon the completion of this offering and the resultant reclassification of our convertible preferred stock warrant liability to stockholders equity (deficit) in connection with such conversion;

(3) the issuance of 198,575 shares of common stock as a result of the expected net exercise of the
Series B Warrants in connection with the completion of this offering, assuming an initial public offering price of $13.00 per share (the mid-point of the price range set forth on the cover page of this preliminary prospectus), which
Series B Warrants will terminate if unexercised prior to the completion of this offering;

(4) the issuance of 1,190,763 shares of our common stock upon completion of this offering as a
result of the automatic conversion of the 2010 Notes (including accrued interest thereon), assuming an initial public offering price of $13.00 per share (the mid-point of the price range set forth on the cover page of this preliminary prospectus)
and assuming the conversion occurs on November 23, 2010 (the expected closing date of this offering) and the resultant change in the value of the beneficial conversion feature; and

(5) the conversion of our remaining warrants to purchase convertible preferred stock, which
warrants are expected to remain outstanding upon the completion of this offering, into warrants to purchase our common stock.

Because the number of shares that will be issued upon exercise of the Series B Warrants and upon conversion of the 2010 Notes depends upon
the initial public offering price per share in this offering and, in the case of the 2010 Notes, the closing date of this offering, the actual number of shares issuable upon such exercise and conversion will likely differ from the respective number
of shares set forth above.

Each $1.00 increase or decrease in the assumed initial public offering price of $13.00 per
share (the mid-point of the price range set forth on the cover page of this preliminary prospectus) would increase or decrease, respectively, the pro forma as adjusted amount of cash and cash equivalents, working capital, total assets and total
stockholders equity by approximately $5.6 million, assuming the number of shares offered by us, as set forth on the cover page of this preliminary prospectus, remains the same and after deducting the estimated underwriting discounts and
commissions and estimated offering costs payable by us.

10

RISK FACTORS

Investing in our common stock involves a high degree of risk. You should carefully consider the following risk factors, as well as the other information in this prospectus, before deciding whether to
invest in shares of our common stock. The occurrence of any of the following risks could have a material adverse effect on our business, financial condition, results of operations and prospects. In that case, the trading price of our common stock
could decline, and you may lose all or part of your investment.

Risks Related to Our Business and Industry

We are largely dependent on the commercial success of Sumavel DosePro and although we have generated revenue from sales of Sumavel
DosePro, we may never become profitable.

We anticipate that, for at least the next several years, our ability to
generate revenues and become profitable will depend in large part on the commercial success of our only marketed product, Sumavel DosePro, which in turn, will depend on several factors, including our ability to:

obtain greater acceptance of Sumavel DosePro by physicians and patients;



maintain adequate levels of coverage and reimbursement for Sumavel DosePro from commercial health plans and government health programs, which we refer
to collectively as third-party payors, particularly in light of the availability of other branded and generic competitive products;



maintain compliance with regulatory requirements;



establish and maintain agreements with wholesalers and distributors on commercially reasonable terms;

We cannot be certain that our continued marketing of Sumavel DosePro will result in increased demand for, and sales of, the product. If we
fail to successfully increase sales of Sumavel DosePro, we may be unable to generate sufficient revenues to grow or sustain our business and we may never become profitable, and our business, financial condition and results of operations will be
materially adversely affected.

We are at an early stage of commercialization and have a history of net losses and negative cash flow
from operations. We cannot predict if or when we will become profitable and anticipate that our net losses and negative cash flow from operations will continue for at least the next several years.

We were organized in 2006, have a limited operating history and there is little historical basis upon which to assess how we will respond
to competitive, economic or technological challenges. Our business and prospects must be considered in light of the risks and uncertainties frequently encountered by pharmaceutical companies in the early stages of commercialization.

We have generated substantial net losses and negative cash flow from operations since our inception in 2006. For example, for 2007, 2008
and 2009 and the nine months ended September 30, 2010, we incurred net losses of $27.7 million, $45.6 million, $45.9 million and $71.4 million, respectively, our net cash used in operating activities was $26.8 million, $41.3 million, $32.4
million and $58.5 million,

11

respectively, and, at September 30, 2010, our accumulated deficit was $196.0 million. We expect our losses and negative cash flow to continue for at least the next several years as a result
of the increasing development expenses in connection with our ongoing clinical development for ZX002 and the cost of the sales and marketing expense associated with Sumavel DosePro. Our ability to generate revenues from Sumavel DosePro or any of our
product candidates will depend on a number of factors, including, in the case of Sumavel DosePro, the factors described in the following two risk factors and, in the case of our product candidates, our ability to successfully complete clinical
trials, obtain necessary regulatory approvals and negotiate arrangements with third parties to help finance the development of, and market and distribute, any product candidates that receive regulatory approval. In addition, we will be subject to
the risk that the marketplace will not accept our products.

Because of the numerous risks and uncertainties associated with
our product development and commercialization efforts, we are unable to predict the extent of our future losses or when or if we will become profitable and it is possible we will never become profitable. Our failure to increase sales of Sumavel
DosePro or to successfully commercialize any of our product candidates that may receive regulatory approval would likely have a material adverse effect on our business, results of operations, financial condition and prospects and could result in our
inability to continue operations.

We may not be successful in executing our sales and marketing strategy for the commercialization of
Sumavel DosePro and, as part of this strategy, we are dependent on our collaboration with Astellas to promote Sumavel DosePro primarily to primary care physicians, OB/GYNs, emergency medicine physicians and urologists. If we are unable to
successfully execute such strategy, we may not be able to generate significant revenue.

Prior to the launch of Sumavel
DosePro in January 2010, we built a commercial sales and marketing organization including sales, marketing, communications, managed markets, trade and distribution functions, which is now focused exclusively on marketing and selling Sumavel DosePro
primarily to physicians, nurses and other healthcare professionals in the United States. Our field sales force includes approximately 80 sales representatives who are promoting Sumavel DosePro primarily to neurologists and other key prescribers of
migraine medications, including headache clinics and headache specialists in the United States. Although we believe we have adequately sized our sales force in order to reach this targeted audience, we may either increase or decrease the size of our
sales force in the future based upon market conditions and actual sales performance. In addition, we could lose sales personnel or the performance of our sales personnel as measured by actual sales may be disappointing. Many of our competitors have
significantly larger sales and marketing organizations, and significantly greater experience than we do in selling, marketing and distributing pharmaceuticals, and we may not be able to compete successfully with them with the commercial
infrastructure we have developed.

To complement our sales force, we entered into an exclusive co-promotion agreement with
Astellas in July 2009 under which Sumavel DosePro is also being promoted primarily to primary care physicians, OB/GYNs, emergency medicine physicians and urologists, or collectively the Astellas Segment, in the United States by approximately 400
Astellas sales representatives. Although the agreement stipulates annual minimum levels of sales effort, we have limited control over the amount and timing of resources that Astellas dedicates to the promotion of Sumavel DosePro, and we do not hire,
train or manage such resources. For example, Astellas could reduce the number of its sales representatives promoting Sumavel DosePro while still complying with these minimum requirements. The ability to generate revenue from our arrangement with
Astellas depends on Astellas efforts in promoting Sumavel DosePro and its ability to achieve broad market acceptance and prescribing of Sumavel DosePro in the Astellas Segment.

We are subject to a number of additional risks associated with our dependence on our co-promotion arrangement with Astellas, including:



Astellas could fail to devote sufficient resources to the promotion of Sumavel DosePro, including by failing to develop, deploy or expand its sales
force as necessary;

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

Astellas could terminate the co-promotion agreement for any or no cause upon 180-days written notice at any time, which may negatively impact our
ability to generate, or prevent us from generating, sufficient revenue;



Astellas could fail to comply with applicable regulatory guidelines with respect to the promotion of Sumavel DosePro, which could result in
administrative or judicially imposed sanctions, including warning letters, civil and criminal penalties, and injunctions; and



disputes regarding the co-promotion agreement that negatively impact or terminate the commercialization efforts of Astellas may negatively impact or
prevent the generation of sufficient revenue or result in significant litigation or arbitration.

Furthermore, Astellas may terminate the co-promotion agreement in the event we undergo a change of control (as defined in the agreement),
if a governmental authority takes action that prevents or makes it unlawful for Astellas to perform its obligations under the agreement, in the event of our inability to supply commercial product, under certain circumstances where a third party
asserts that the making or selling of Sumavel DosePro infringes the intellectual property rights of a third party, if we materially breach our minimum sales effort obligations and do not cure that breach within a specified period, upon the
occurrence of a large scale recall or market withdrawal of Sumavel DosePro, upon a failure of the Sumavel DosePro brand to achieve certain minimum sales levels in 2010 or 2011, upon a material uncured breach by us or in the event of our insolvency
or bankruptcy or other event which affects our ability to perform our obligations under the agreement. Accordingly, we cannot assure you that Astellas will not terminate the agreement under these circumstances. As an alternative to termination, we
and Astellas could agree to amend or otherwise restructure the current co-promotion agreement. Such amendment or restructuring could change the financial terms of our agreement, change our respective minimum sales force requirements, or otherwise
materially alter our co-promotion relationship. Such an amendment or restructuring could require us to expand our sales force or otherwise invest significant additional financial resources in order to adequately support the successful sales and
marketing of Sumavel DosePro.

In addition, our co-promotion agreement with Astellas expires on June 30, 2013, subject to
a one-year extension at the option of Astellas. We cannot assure you that Astellas will enter into any extension of the agreement or, if it does so, that it will not condition any such extension upon changes in the agreement that could have a
material adverse effect on us. If Astellas were to terminate the agreement or elect not to extend the agreement upon its expiration, we would lose the efforts of their sales force, and we would need to make arrangements with another third party to
replace Astellas sales force, or significantly expand our sales and marketing organization. We may not be able to enter into such arrangements with third parties in a timely manner, on acceptable terms or at all. To the extent that we enter
into another co-promotion or other licensing arrangement, our portion of retained product revenues is likely to be lower than if we directly marketed and sold Sumavel DosePro solely on our own, and a portion of those revenues generated will depend
upon the efforts of such third parties similar to our dependence on Astellas, and these efforts may not be successful. If our co-promotion agreement with Astellas is terminated and we are unable to find another partner for the promotion of Sumavel
DosePro in the primary care segment in the United States, we may not be able to expand our own sales and marketing capabilities to cover this segment and any such expansion could, in any event, substantially increase our expenses and capital
requirements that we might not be able to fund.

If we are unable to successfully implement our commercialization plans and
drive adoption by patients and physicians of Sumavel DosePro through our sales, marketing and commercialization efforts and the efforts of Astellas, then we will not be able to generate significant revenue which will have a material adverse effect
on our business, results of operations, financial condition and prospects.

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If Sumavel DosePro, ZX002, if
approved, or any other product candidate for which we receive regulatory approval does not achieve broad market acceptance or coverage by third-party payors, the revenues that we generate will be limited.

The commercial success of Sumavel DosePro, ZX002, if approved, and any product candidates for which we obtain marketing approval from the
U.S. Food and Drug Administration, or FDA, or other regulatory authorities will depend upon the acceptance of these products by physicians, patients, healthcare payors and the medical community. Coverage and reimbursement of our approved product by
third-party payors is also necessary for commercial success. The degree of market acceptance of Sumavel DosePro and any other product candidates for which we may receive regulatory approval will depend on a number of factors, including:



our ability to provide acceptable evidence of safety and efficacy;



acceptance by physicians and patients of the product as a safe and effective treatment;



the relative convenience and ease of administration;



the prevalence and severity of adverse side effects;



limitations or warnings contained in a products FDA-approved labeling;



the clinical indications for which the product is approved;



in the case of product candidates that are controlled substances, the U.S. Drug Enforcement Agency, or DEA, scheduling classification;



availability and perceived advantages of alternative treatments;



any negative publicity related to our or our competitors products;



the effectiveness of our or any current or future collaborators sales, marketing and distribution strategies;

the willingness of patients to pay out of pocket in the absence of third-party payor coverage.

For example, while we believe the needle-free nature of our DosePro technology will appeal to patients, some patients may not react favorably to the
subcutaneous delivery of drug products by DosePro. Our experience indicates that some patients will experience pain upon injection with the DosePro technology and/or reactions at the site of injection. Any undesirable side effects have the potential
to limit market acceptance of our product candidates.

In addition, products used to treat and manage pain, especially in the
case of opioids, are from time to time subject to negative publicity, including illegal use, overdoses, abuse, diversion, serious injury and death. These events have led to heightened regulatory scrutiny. Controlled substances are classified by the
DEA as Schedule I through V substances, with Schedule I substances being prohibited for sale in the United States, Schedule II substances considered to present the highest risk of abuse and Schedule V substances being considered to present the
lowest relative risk of abuse. ZX002 contains hydrocodone, and we anticipate it will be regulated as a Schedule II controlled substance, and despite the strict regulations on the marketing, prescribing and dispensing of such substances,
illicit use and abuse of hydrocodone is well-documented. Thus, the regulatory approval process and the marketing of ZX002 may generate public controversy that may adversely affect regulatory approval and market acceptance of ZX002.

Our efforts to educate the medical community and third-party payors on the benefits of Sumavel DosePro, ZX002, if approved,
and any of our product candidates for which we obtain marketing approval from the FDA or other regulatory authorities and gain broad market acceptance may require

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significant resources and may never be successful. If our products do not achieve an adequate level of acceptance by physicians, third-party payors and patients, we may not generate sufficient
revenue from these products to become or remain profitable.

Our short operating history makes it difficult to evaluate our business and
prospects.

We commenced our operations on August 25, 2006. Our operations to date have been limited to organizing
and staffing our company, scaling up manufacturing operations with our third-party contract manufacturers, building a sales and marketing organization, conducting product development activities for our product and product candidates, in-licensing
rights to ZX002, and commercializing Sumavel DosePro. Moreover, Sumavel DosePro is our only product that is approved for sale. Consequently, any predictions about our future performance may not be as accurate as they could be if we had a history of
successfully developing and commercializing pharmaceutical products.

We depend on wholesale pharmaceutical distributors for retail
distribution of Sumavel DosePro, and if we lose any of our significant wholesale pharmaceutical distributors, our business could be harmed.

The majority of our sales of Sumavel DosePro are to wholesale pharmaceutical distributors who, in turn, sell the products to pharmacies, hospitals and other customers. Three wholesale pharmaceutical
distributors, Cardinal Health, Inc., McKesson Corporation and AmerisourceBergen Corporation, individually comprised 48.2%, 37.2% and 10.2%, respectively, of our total gross sales of Sumavel DosePro for the nine months ended September 30,
2010, which may result in substantial fluctuations in our results of operations from period to period. The loss of any of these wholesale pharmaceutical distributors accounts or a material reduction in their purchases could have a material
adverse effect on our business, results of operations, financial condition and prospects.

In addition, these wholesale
customers comprise a significant part of the distribution network for pharmaceutical products in the United States. This distribution network has undergone, and may continue to undergo, significant consolidation marked by mergers and acquisitions.
As a result, a small number of large wholesale distributors control a significant share of the market. Consolidation of drug wholesalers has increased, and may continue to increase, competitive and pricing pressures on pharmaceutical products. In
addition, at times, wholesaler purchases may exceed customer demand, resulting in reduced wholesaler purchases in later quarters, which may result in substantial fluctuations in our results of operations from period to period. We cannot assure you
that we can manage these pricing pressures or that wholesaler purchases will not decrease as a result of this potential excess buying.

Our sales can be greatly affected by the inventory levels our wholesalers carry. We monitor wholesaler inventory of Sumavel DosePro using a combination of methods. Pursuant to distribution service
agreements with our three largest wholesale customers, we receive inventory level reports. For most other wholesalers where we do not receive inventory level reports, however, our estimates of wholesaler inventories may differ significantly from
actual inventory levels. Significant differences between actual and estimated inventory levels may result in excessive production (requiring us to hold substantial quantities of unsold inventory), inadequate supplies of products in distribution
channels, insufficient product available at the retail level, and unexpected increases or decreases in orders from our wholesalers. These changes may cause our revenues to fluctuate significantly from quarter to quarter, and in some cases may cause
our operating results for a particular quarter to be below our expectations or the expectations of securities analysts or investors. If our financial results are below expectations for a particular period, the market price of our common stock may
drop significantly.

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We expect intense competition,
including from generic products, and if our competitors market and/or develop treatments for migraine or pain that are marketed more effectively, approved more quickly than our product candidates or demonstrated to be safer or more effective than
our products, our commercial opportunities will be reduced or eliminated.

The pharmaceutical industry is characterized
by rapidly advancing technologies, intense competition and a strong emphasis on proprietary therapeutics. We face competition from a number of sources, some of which may target the same indications as our product or product candidates, including
large pharmaceutical companies, smaller pharmaceutical companies, biotechnology companies, academic institutions, government agencies and private and public research institutions, many of which have greater financial resources, marketing
capabilities, including well-established sales forces, manufacturing capabilities, experience in obtaining regulatory approvals for product candidates and other resources than us. Many large, well-capitalized companies offer products in the United
States that compete with Sumavel DosePro. Sumavel DosePro currently competes with branded products in the triptan class such as Imitrex and Treximet marketed by GlaxoSmithKline, or GSK, as well as six other branded triptan therapies being sold
by AstraZeneca PLC, Endo Pharmaceuticals Holdings Inc., Johnson & Johnson, Merck & Co., Inc., and Pfizer Inc. Nautilus Neurosciences, Inc. also began selling Cambia, diclofenac potassium for oral
solution, for the treatment of migraine in June 2010. In addition, we face competition from generic sumatriptan injection, now marketed in the United States as an authorized generic of the Imitrex STATdose System, or Imitrex STATdose, by Par
Pharmaceutical Companies, Inc. and Sandoz Inc. (a Novartis AG company). In addition, the FDA recently approved Alsuma (sumatriptan injection), a needle-based autoinjector which was developed and is manufactured by Meridian Medical
Technologies, a subsidiary of King Pharmaceuticals, Inc., and will be distributed by US WorldMeds, LLC. Finally, generic injectable sumatriptan in the form of vials and prefilled syringes is available from the following nine companies: APP
Pharma (Fresenius Kabi), Bedford Laboratories, Cura Pharmaceutical Co., Inc., JHP Pharmaceuticals, LLC, Par Pharmaceutical Companies, Sagent Pharmaceuticals, Inc./ Strides Arcolab Limited, Sandoz, Teva Pharmaceutical Industries Limited, and
Wockhardt Limited. Although these products may not be directly substituted for Sumavel DosePro, generic versions of sumatriptan injection and alternative autoinjector forms of sumatriptan injection may reduce the future adoption of
Sumavel DosePro by third-party payors and consumers, as financial pressure to use generic products may encourage the use of a generic product over Sumavel DosePro. Sumavel DosePro is currently more expensive on a per dose basis than most of the
competing branded and all of the generic triptan products for migraine, which may also limit the coverage and reimbursement by third-party payors, which could adversely affect adoption by physicians and patients.

If approved for the treatment of moderate to severe chronic pain, we anticipate that ZX002 would compete against other marketed branded
and generic pain therapeutics. Opioid therapeutics generally fall into two classes: codeines, which include oxycodones and hydrocodones, and morphines. ZX002 is a hydrocodone, the most commonly prescribed opioid in
the United States, and we expect ZX002 will compete with therapeutics within both the codeine and morphine classes. These therapeutics include both Schedule II and Schedule III products being marketed by companies such as
Endo Pharmaceuticals Holdings Inc., Johnson & Johnson, King Pharmaceuticals, Inc., Mallinckrodt Inc., Purdue Pharma L.P., Teva Pharmaceutical Industries Limited and Watson Pharmaceuticals, Inc.

In addition to already marketed therapeutics, we also face competition from product candidates that are or could be under development by
many of the above-mentioned entities and others. For example, there are several products for the treatment of migraine under development by large pharmaceutical companies such as GSK and Merck & Co., Inc., and other smaller
companies such as NuPathe, Inc. and MAP Pharmaceuticals, Inc. If approved, ZX002 may also compete with at least fifteen opioid product candidates under development, including abuse and diversion resistant formulations of currently
available opioids, novel opioids and alternative delivery forms of various opioids under development at other pharmaceutical companies, including extended-release hydrocodone product candidates being developed by Cephalon, Inc., Egalet A/S
and King Pharmaceuticals, Inc. ZX002 may

16

also face competition from non-opioid product candidates including new chemical entities, as well as alternative delivery forms of non-steroidal anti-inflammatory drugs. These new opioid and
non-opioid product candidates are being developed by companies such as Acura Pharmaceuticals, Inc., Altea Therapeutics Corporation, Elite Pharmaceuticals, Inc., Javelin Pharmaceuticals, Inc., Pfizer Inc. and QRxPharma Ltd.

We expect Sumavel DosePro and, if approved, ZX002 and any of our other product candidates to compete on the basis of, among
other things, product efficacy and safety, time to market, price, patient reimbursement by third-party payors, extent of adverse side effects and convenience of treatment procedures. One or more of our competitors may develop needle-free injectable
products, products to address chronic pain or other products that compete with ours, obtain necessary approvals for such products from the FDA, or other agencies, if required, more rapidly than us or develop alternative products or therapies that
are safer, more effective and/or more cost effective than any products developed by us. If any of our product candidates receive the requisite regulatory approval and classification and are marketed, the competition which we will encounter will
have, and the competition we are currently encountering with our Sumavel DosePro product has had and will continue to have, an effect on our product prices, market share and results of operations. We may not be able to differentiate any products
that we are able to market from those of our competitors, successfully develop or introduce new products that are less costly or offer better results than those of our competitors, or offer purchasers of our products payment and other commercial
terms as favorable as those offered by our competitors.

In addition, competitors may seek to develop alternative formulations
of our product candidates and/or alternative drug delivery technologies that address our targeted indications. The commercial opportunity for Sumavel DosePro and our product candidates could be significantly harmed if competitors are able to develop
alternative formulations and/or drug delivery technologies outside the scope of our products. Compared to us, many of our potential competitors have substantially greater:



capital resources;



research and development resources and experience, including personnel and technology;

resources, experience and expertise in prosecution and enforcement of intellectual property rights.

As a result of these factors, our competitors may obtain regulatory approval of their products more rapidly than we are able to or may
obtain patent protection or other intellectual property rights that limit or block us from developing or commercializing our product candidates. Our competitors may also develop drugs that are more effective, more useful, better tolerated, subject
to fewer or less severe side effects, more widely prescribed or accepted or less costly than ours and may also be more successful than us in manufacturing and marketing their products. If we are unable to compete effectively with the marketed
therapeutics of our competitors or if such competitors are successful in developing products that compete with Sumavel DosePro or any of our product candidates that are approved, our business, results of operations, financial condition and prospects
may be materially adversely affected.

17

We are dependent on numerous
third parties in our supply chain, all of which are currently single source suppliers, for the commercial supply of Sumavel DosePro and a sole source supplier for clinical supply of ZX002, and if we experience problems with any of these suppliers,
the manufacturing of Sumavel DosePro and ZX002 could be delayed.

While we own most of the specialized equipment used
to manufacture critical components of Sumavel DosePro, we do not own or operate manufacturing facilities and currently lack the in-house capability to manufacture Sumavel DosePro, ZX002 or any other products or product candidates. Our DosePro device
and Sumavel DosePro are manufactured by contract manufacturers, component fabricators and secondary service providers. Final aseptic fill, finish, assembly and packaging of Sumavel DosePro are performed at Patheon UK Limited, Swindon, United
Kingdom, a specialist in the aseptic fill/finish of injectables and other sterile pharmaceutical products. In addition, Nypro Limited, located in Bray, Ireland, manufactures the actuator assemblies and injection molded components for our DosePro
device and MGlas AG, located in Schweinfurt, Germany, manufactures the specialized glass capsule that houses the sumatriptan active pharmaceutical ingredient, or API, in our DosePro device. Each of these manufacturers and each other company
that supplies, fabricates or manufactures any component used in our DosePro device is currently the only qualified source of their respective components. We currently rely on Dr. Reddys as the only supplier of sumatriptan API for
use in Sumavel DosePro. We also outsource all manufacturing and packaging of the clinical trial materials for ZX002 to third parties. Although we plan to qualify additional manufacturers and suppliers of some of the components used in Sumavel
DosePro, there can be no assurance that we will be able to do so and the current manufacturers and suppliers of these components will likely be single source suppliers to us for a significant period of time. Similarly, under our license agreement,
Elan is the exclusive manufacturer of ZX002. We may never be able to establish additional sources of supply for ZX002.

Manufacturers and suppliers are subject to regulatory requirements covering, among other things, manufacturing, testing, quality control
and record keeping relating to our product and product candidates, and are subject to ongoing inspections by regulatory agencies. Failure by any of our manufacturers or suppliers to comply with applicable regulations may result in long delays and
interruptions to our manufacturing supply, and increase our costs, while we seek to secure another supplier who meets all regulatory requirements. Accordingly, the loss of any of our current third-party manufacturers or suppliers could have a
material adverse effect on our business, results of operations, financial condition and prospects.

Reliance on third-party
manufacturers and suppliers entails risks to which we would not be subject if we manufactured Sumavel DosePro or our product candidates ourselves, including:



reliance on the third parties for regulatory compliance and quality assurance;



the possible breach of the manufacturing agreements by the third parties because of factors beyond our control or the insolvency of any of these third
parties or other financial difficulties, labor unrest, natural disasters or other factors adversely affecting their ability to conduct their business; and



the possibility of termination or non-renewal of the agreements by the third parties, at a time that is costly or inconvenient for us, because of our
breach of the manufacturing agreement or based on their own business priorities.

If our contract
manufacturers or suppliers fail to deliver the required commercial quantities of Sumavel DosePro and its various components, the quantities of ZX002 or any of our other product candidates required for our clinical trials and, if approved, for
commercial sale, on a timely basis and at commercially reasonable prices, and we are unable to find one or more replacement manufacturers or suppliers capable of production at a substantially equivalent cost, in substantially equivalent volumes and
quality, and on a timely basis, we would likely be unable to meet demand for our products and would have to delay or terminate our pre-clinical or clinical trials, and we would lose potential revenue. It may also take a significant period of time to
establish an alternative source of supply for our product,

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product candidates and components and to have any such new source approved by the FDA or any applicable foreign regulatory authorities. Furthermore, any of the above factors could cause the delay
or suspension of initiation or completion of clinical trials, regulatory submissions or required approvals of our product candidates, cause us to incur higher costs and could prevent us from commercializing our product candidates successfully.

We may encounter delays in the manufacturing of Sumavel DosePro or fail to generate revenue if our supply of the components of our
DosePro drug delivery system is interrupted.

Our DosePro drug delivery system is sourced, manufactured and assembled
by multiple third parties across different geographic locations in Europe, including the United Kingdom, Germany and Ireland. All contract manufacturers and component suppliers have been selected for their specific competencies in the manufacturing
processes and materials that make up the DosePro system. The components of DosePro include the actuator subassembly, capsule subassembly, and the setting mechanism. The actuator subassembly is comprised of nine individual components which are
collectively supplied by six different third-party manufacturers. The capsule subassembly that houses the sterile drug formulation sumatriptan is comprised of five different components also supplied by four third-party manufacturers. Each of
these third-party manufacturers is currently the single source of their respective components. If any of these manufacturers is unable to supply its respective component for any reason, including due to violations of the FDAs Quality System
Regulation, or QSR, requirements, our ability to manufacture the finished DosePro device will be adversely affected and our ability to meet the distribution requirements for any product sales of Sumavel DosePro and the resulting revenue therefrom
will be negatively affected. Accordingly, there can be no assurance that any failure in any part of our supply chain will not have a material adverse effect on our ability to generate revenue from Sumavel DosePro, which in turn could have a material
adverse effect on our business, results of operations, financial condition and prospects.

We rely on third parties to perform many
necessary services for our commercial products, including services related to the distribution, invoicing, storage and transportation of our products.

We have retained third-party service providers to perform a variety of functions related to the sale and distribution of our products, key aspects of which are out of our direct control. For example, we
rely on Cardinal Health 105, Inc. (a/k/a Specialty Pharmaceutical Services) to provide key services related to logistics, warehousing and inventory management, distribution, contract administration and chargeback processing, accounts receivable
management and call center management, and, as a result, most of our inventory is stored at a single warehouse maintained by the service provider. We place substantial reliance on this provider as well as other third-party providers that perform
services for us, including entrusting our inventories of products to their care and handling. If these third-party service providers fail to comply with applicable laws and regulations, fail to meet expected deadlines, or otherwise do not carry out
their contractual duties to us, or encounter physical damage or natural disaster at their facilities, our ability to deliver product to meet commercial demand would be significantly impaired. In addition, we utilize third parties to perform various
other services for us relating to sample accountability and regulatory monitoring, including adverse event reporting, safety database management and other product maintenance services. If the quality or accuracy of the data maintained by these
service providers is insufficient, our ability to continue to market our products could be jeopardized or we could be subject to regulatory sanctions. We do not currently have the internal capacity to perform these important commercial functions,
and we may not be able to maintain commercial arrangements for these services on reasonable terms.

The perception that our DosePro
needle-free drug delivery system should be pain free may limit patient adoption.

We believe that there is a perception
among some patients, physicians and other customers that a needle-free delivery system should be pain free. While our experience indicates that some patients will

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experience pain upon injection with the DosePro technology, this pain sensation is consistent with the pain sensation associated with injection with a fine gauge needle and can be generally
characterized as transient mild discomfort. In addition, some patients will experience local injection site signs and reactions following injection with DosePro. The fact that the use of our DosePro system may be accompanied by a certain amount of
pain upon injection and local injection site signs and reactions may limit its adoption by patients, physicians and other customers.

ZX002 is subject to extensive regulation, and we cannot give any assurance that it or any of our other product candidates will receive regulatory
approval or be successfully commercialized.

We currently are developing ZX002 for the treatment of moderate to severe
chronic pain. The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of opioid drug products, among other things, are subject to extensive regulation by the FDA, the DEA and other regulatory authorities in the
United States. We are not permitted to market ZX002 in the United States unless and until we receive regulatory approval from the FDA. We cannot provide any assurance that we will obtain regulatory approval for ZX002 or any of our other product
candidates, or that any such product candidates will be successfully commercialized.

We have not yet completed all necessary
studies, nor submitted a new drug application, or NDA, or received marketing approval, for ZX002. Obtaining approval of an NDA is a lengthy, expensive and uncertain process. The FDA also has substantial discretion in the drug approval process,
including the ability to delay, limit or deny approval of a product candidate for many reasons. For example:



the FDA may not deem a product candidate safe and effective;



the FDA may not find the data from pre-clinical studies and clinical trials sufficient to support approval;



the FDA may require additional pre-clinical studies or clinical trials;



the FDA may not approve of our third-party manufacturers processes and facilities; or



the FDA may change its approval policies or adopt new regulations.

ZX002 has undergone Phase 1 pharmacokinetics studies as well as Phase 2 clinical trials. However, these studies and trials were
conducted by a third party and, accordingly, we did not directly participate in their design or execution. In addition, we will also need to successfully complete Phase 3 clinical trials to establish its safety and efficacy, additional Phase 1
studies, and additional pre-clinical studies prior to our submission of an NDA to the FDA for approval. We initiated the Phase 3 clinical development program for ZX002 in March 2010. ZX002 and any of our other product candidates may fail to achieve
their specified endpoints in clinical trials. Furthermore, product candidates such as ZX002 may not be approved even if they achieve their specified endpoints in clinical trials. The FDA may disagree with our trial design and our interpretation of
data from clinical trials, or may change the requirements for approval even after it has reviewed and commented on the design for our clinical trials. The FDA may also approve a product candidate for fewer or more limited indications than we
request, or may grant approval contingent on the performance of costly post-approval clinical trials. In addition, the FDA may not approve the labeling claims that we believe are necessary or desirable for the successful commercialization of our
product candidates.

If we are unable to obtain regulatory approval for ZX002 or any other product candidates on the timeline
we anticipate, we will not be able to execute our business strategy effectively and our ability to generate additional revenues beyond Sumavel DosePro will be limited, which would have a material adverse impact on our business, results of
operations, financial condition and prospects.

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Our clinical trials may fail to
demonstrate acceptable levels of safety and efficacy of ZX002 or any of our other product candidates, which could prevent or significantly delay their regulatory approval.

Our ZX002 product candidate and our other product candidates are prone to the risks of failure inherent in drug development. Before
obtaining U.S. regulatory approval for the commercial sale of ZX002 or any other product candidate, we must gather substantial evidence from well-controlled clinical trials that demonstrate to the satisfaction of the FDA that the product candidate
is safe and effective, and similar regulatory approvals would be necessary to commercialize the product candidate in other countries.

In light of widely publicized events concerning the safety risk of certain drug products, particularly opioid drug products, regulatory authorities, members of Congress, the Government Accountability
Office, medical professionals and the general public have raised concerns about potential drug safety issues. These events have resulted in the withdrawal of drug products, revisions to drug labeling that further limit use of the drug products and
establishment of risk management programs that may, for instance, restrict distribution of drug products after approval. In addition, the Federal Food, Drug, and Cosmetic Act, or FFDCA, as amended by the Food and Drug Administration Amendments Act
of 2007, grants significant expanded authority to the FDA, much of which is aimed at improving the safety of drug products before and after approval. In particular, the FFDCA authorizes the FDA to, among other things, require post-approval studies
and clinical trials, mandate changes to drug labeling to reflect new safety information and require a risk evaluation and mitigation strategy, or REMS, for certain drugs, including certain currently approved drugs. It also significantly expands the
federal governments clinical trial registry and results databank, which we expect will result in significantly increased government oversight of clinical trials. Under the FFDCA, companies that violate these and other provisions of the law are
subject to substantial civil monetary penalties, among other regulatory, civil and criminal penalties.

The increased attention
to drug safety issues may result in a more cautious approach by the FDA in its review of our clinical trials. Data from clinical trials may receive greater scrutiny with respect to safety, which may make the FDA or other regulatory authorities more
likely to terminate clinical trials before completion, or require longer or additional clinical trials that may result in a delay or failure in obtaining approval or approval for a more limited indication than originally sought.

With regard to ZX002, data from a Phase 2 clinical trial in osteoarthritis patients has shown what we believe is a clinically
acceptable safety profile and a pharmacodynamic profile which supports further product development for the treatment of moderate to severe pain in patients requiring around-the-clock opioid therapy. In the two Phase 2 clinical trials conducted
to date, patients experienced mild to moderate adverse events, including nausea, vomiting, headache, dizziness, sweating, constipation and drowsiness, which are similar to the reported side effects of opioids currently prescribed for chronic pain.
However, our licensor, Elan Pharma International Ltd., or Elan, conducted these trials and we have not independently verified the data or completed any of our own Phase 2 or Phase 3 trials for this product candidate. In addition, these results
may not be predictive of results obtained in our ongoing Phase 3 clinical trials or any other required future trials, and we may be unable to demonstrate sufficient safety and efficacy to obtain the requisite regulatory approvals or approvals for
commercially viable uses. A number of companies in the biotechnology and pharmaceutical industries have suffered significant setbacks in advanced clinical trials, even after promising results in earlier trials. If ZX002 is not shown to be safe and
effective in clinical trials, this program could be delayed or terminated, which could have a material adverse effect on our business, results of operations, financial condition and prospects.

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Delays in the commencement or
completion of clinical testing for ZX002 or pre-clinical or clinical testing for any of our other product candidates could result in increased costs to us and delay or limit our ability to pursue regulatory approval or generate revenues.

Clinical trials are very expensive, time consuming and difficult to design and implement. Even if the results of our
clinical trials are favorable, the clinical trials of ZX002 will continue for several years and may take significantly longer than expected to complete. Delays in the commencement or completion of clinical testing for ZX002 or pre-clinical or
clinical testing for any of our other product candidates could significantly affect our product development costs and business plan. In March 2010, we initiated a Phase 3 clinical development program for ZX002, including a pivotal efficacy trial.
Phase 3 clinical efficacy trials, in general, are significantly more complex and time-consuming and involve more patients than the Phase 1 and 2 clinical trials that have been completed to date. We do not know whether our Phase 3 clinical
trials of ZX002 or any other pre-clinical or clinical trials will begin on time or be completed on schedule, if at all. The commencement and completion of clinical trials can be delayed for a number of reasons, including delays related to:

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obtaining regulatory authorization to commence a clinical trial;

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reaching agreement on acceptable terms with prospective clinical research organizations, or CROs, clinical investigators and trial sites, the terms of
which can be subject to extensive negotiation and may vary significantly among different CROs, clinical investigators and trial sites;



manufacturing or obtaining sufficient quantities of a product candidate for use in clinical trials;



obtaining institutional review board, or IRB, approval to initiate and conduct a clinical trial at a prospective site;

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identifying, recruiting and training suitable clinical investigators;



identifying, recruiting and enrolling subjects to participate in clinical trials for a variety of reasons, including competition from other clinical
trial programs for the treatment of pain, migraine or similar indications;



retaining patients who have initiated a clinical trial but may be prone to withdraw due to side effects from the therapy, lack of efficacy, personal
issues, or for any other reason they choose, or who are lost to further follow-up;

We believe that we have planned and designed an adequate Phase 3 clinical trial program for ZX002, and we presented the trial design
for our Phase 3 trials to the FDA at our End of Phase 2 meeting in June 2008. Although we believe the FDA has generally agreed with the design of our Phase 3 clinical trial program, the FDA could still determine that it is not
satisfied with our plan or the details of our pivotal clinical trial protocols and designs. While the FDA has provided us with a written record of our discussions and responses to our questions at our End of Phase 2 meeting, such records and
responses do not guarantee that the FDA will deem our trial design to be sufficient for the purpose of obtaining marketing approval for ZX002. We did not seek a Special Protocol Assessment from the FDA for our ongoing pivotal Phase 3 efficacy study
for ZX002 (Study 801).

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In addition, chronic
pain patients have historically been difficult to keep enrolled in clinical trials. If a significant number of patients fail to stay enrolled in any of our current or future clinical trials of ZX002 and such failure is not adequately accounted for
in our trial design and enrollment assumptions, our clinical development program could be delayed. Clinical trials may also be delayed or repeated as a result of ambiguous or negative interim results or unforeseen complications in testing. In
addition, a clinical trial may be suspended or terminated by us, the FDA, the IRB overseeing the clinical trial at issue, any of our clinical trial sites with respect to that site, or other regulatory authorities due to a number of factors,
including:



failure to design appropriate clinical trial protocols;



failure by us, our employees, our CROs or their employees to conduct the clinical trial in accordance with all applicable FDA, DEA or other regulatory
requirements or our clinical protocols;



inspection of the clinical trial operations or trial sites by the FDA or other regulatory authorities resulting in the imposition of a clinical hold;



discovery of serious or unexpected toxicities or side effects experienced by study participants or other unforeseen safety issues;



lack of adequate funding to continue the clinical trial, including the incurrence of unforeseen costs due to enrollment delays, requirements to conduct
additional trials and studies and increased expenses associated with the services of our CROs and other third parties;



lack of effectiveness of any product candidate during clinical trials;



slower than expected rates of subject recruitment and enrollment rates in clinical trials;



failure of our CROs or other third-party contractors to comply with all contractual requirements or to perform their services in a timely or acceptable
manner;

Additionally, changes in applicable regulatory requirements and guidance may occur and we may need to amend clinical trial protocols to
reflect these changes. Amendments may require us to resubmit our clinical trial protocols to IRBs for reexamination, which may impact the costs, timing or successful completion of a clinical trial. If we experience delays in completion of, or if we
terminate, any of our clinical trials, the commercial prospects for ZX002 and our other product candidates may be harmed, which may have a material adverse effect on our business, results of operations, financial condition and prospects.

Our competitors could receive FDA approval for an extended-release hydrocodone product before we receive FDA approval for ZX002, and thus could be
granted regulatory exclusivity that could significantly delay our ability to receive approval for and commercialize ZX002 and therefore dramatically reduce its market potential. Our competitors could also pursue regulatory and other strategies to
combat competition from 505(b)(2) products, which also may negatively affect the approval and commercialization of ZX002 and any of our other product candidates.

The Drug Price Competition and Patent Term Restoration Act of 1984, also known as the Hatch-Waxman Amendments, added Section 505(b)(2) to the FFDCA, or Section 505(b)(2). Section 505(b)(2)
permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by or for the applicant and for which the applicant has not obtained a right of reference. For example, we obtained FDA
marketing approval of Sumavel DosePro

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under Section 505(b)(2), and we intend to submit the NDA for ZX002 under Section 505(b)(2), and as such the NDA will rely, in part, on the FDAs previous findings of safety and
effectiveness for hydrocodone.

Certain of our competitors may file a 505(b)(2) application for extended-release
hydrocodone either before or shortly after we submit our own NDA for ZX002. The first approved 505(b)(2) applicant for a particular condition of use, or change to a marketed product, such as a new extended-release formulation for a previously
approved product, may be granted three-year Hatch-Waxman exclusivity if one or more clinical studies, other than bioavailability or bioequivalence studies, was essential to the approval of the application and was conducted/sponsored by the
applicant. Three-year Hatch-Waxman exclusivity delays the FDAs approval of other 505(b)(2) applicants for the same condition of use or change to the drug product that was granted exclusivity, regardless of the date of submission of each NDA.
We believe that several competitors are developing extended-release hydrocodone products, and if the FDA approves a competitors 505(b)(2) application for its extended-release hydrocodone product before our application, and
granted the competitor three-year exclusivity, the FDA would be precluded from making effective our NDA for ZX002 until after that three-year exclusivity period has run, and such delay would dramatically reduce our expected market potential for
ZX002. Additionally, even if our 505(b)(2) application for extended-release hydrocodone is approved first, we may still be subject to competition by other hydrocodone products, including approved products or other 505(b)(2)
applications for different conditions of use that would not be restricted by the three-year exclusivity.

In addition, approval
under Section 505(b)(2) generally requires the absence of any other patents covering the product candidate in question and competitors and others have the ability to take numerous steps to block or delay approval of product candidates under
Section 505(b)(2), including:



extending patent protection for existing products that would block Section 505(b)(2) approval of the product candidate by pursuing new patents for
existing products that may be granted just before the expiration of one patent, which could extend patent protection for a number of years or otherwise delay the launch of generic, 505(b)(2) or other competing products;



submitting Citizen Petitions to request the FDA to take adverse administrative action with respect to approval of a generic, 505(b)(2) or other
competing product;



filing patent infringement lawsuits, whether or not meritorious, to trigger up to a 30-month stay in the approval of a generic, 505(b)(2) or other
competing product; and



engaging in state-by-state initiatives to enact legislation or regulatory policies that restrict the substitution of some generic, 505(b)(2) or other
competing drugs for brand-name drugs.

If any of these strategies are successful, our ability to obtain approval of and
commercialize ZX002 and any of our other product candidates for which we rely on Section 505(b)(2) will be adversely affected.

We
rely on third parties to conduct our pre-clinical and clinical trials. If these third parties do not successfully carry out their contractual duties or meet expected deadlines, we may not be able to obtain regulatory approval for or commercialize
our product candidates and our business could be substantially harmed.

We have agreements with third-party CROs to
conduct our ongoing Phase 3 trials for ZX002, and anticipate that we may enter into other such agreements in the future regarding any of our other product candidates. We rely heavily on these parties for the execution of our clinical and
pre-clinical studies, and control only certain aspects of their activities. Nevertheless, we are responsible for ensuring that each of our studies is conducted in accordance with the applicable protocol. We and our CROs are required to comply with
current good clinical practices, or GCPs. The FDA enforces these GCP regulations through periodic inspections of trial sponsors, principal investigators and trial sites. If we or our CROs fail to comply with applicable GCP regulations, the data
generated in our clinical trials may be deemed unreliable and the FDA may require us to perform additional clinical trials before approving our marketing applications. We cannot

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assure you that, upon inspection, the FDA and similar foreign regulators will determine that any of our clinical trials comply or complied with GCP regulations. In addition, our clinical trials
must be conducted with product produced under current good manufacturing practices, or cGMPs, regulations, and require a large number of test subjects. Our failure to comply with these regulations may require us to repeat clinical trials, which
would delay the regulatory approval process.

If any of our relationships with these third-party CROs terminate, we may not be
able to enter into arrangements with alternative CROs on commercially reasonable terms, or at all. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the
quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated and we may not be
able to obtain regulatory approval for or successfully commercialize our product candidates. As a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could increase and our ability to
generate additional revenues could be delayed.

Switching or adding additional CROs can involve substantial cost and require
extensive management time and focus. In addition, there is a natural transition period when a new CRO commences work. As a result, delays may occur, which can materially impact our ability to meet our desired clinical development timelines. Though
we carefully manage our relationships with our CROs, there can be no assurance that we will not encounter similar challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, results
of operations, financial condition and prospects.

The development of a REMS for ZX002 could cause significant delays in the approval
process for ZX002 and would add additional layers of regulatory requirements, including possible prescribing restrictions, requirements for post-marketing studies or restrictions on distribution and use, which could significantly impact our ability
to commercialize ZX002 and dramatically reduce its market potential.

The Food and Drug Administration Amendments Act,
or FDAAA, added Section 505-1 to the FFDCA. Section 505-1 permits FDA to require a REMS for a drug product to ensure the safe use of the drug. A REMS is a strategic safety program that the FDA requires to ensure that the benefits of a drug
outweigh its risks. In determining whether a REMS is necessary, the FDA must consider the size of the population likely to use the drug, the seriousness of the disease or condition to be treated, the expected benefit of the drug, the duration of
treatment, the seriousness of known or potential adverse events, and whether the drug is a new molecular entity. If the FDA determines a REMS is necessary, the drug sponsor must agree to the REMS plan at the time of approval. A REMS may be required
to include various elements, such as a medication guide or patient package insert, a communication plan to educate health care providers of the drugs risks, limitations on who may prescribe or dispense the drug, requirements that patients
enroll in a registry or undergo certain health evaluations or other measures that the FDA deems necessary to assure the safe use of the drug. In addition, the REMS must include a timetable to assess the strategy at 18 months, three years and seven
years after the strategys approval.

In February 2009, the FDA informed drug manufacturers that it will require a
REMS for all sustained-release opioid drug products. The FDA has since initiated efforts to develop a new standardized REMS for these opioid medications to ensure their safe use. A controlled-release formulation of hydrocodone, such as ZX002,
would be required to have a REMS. The FDAs authority to take this action is based on risk management and post-market safety provisions within the FDAAA. We intend to submit a REMS at the time of the NDA submission for ZX002. The development of
the REMS could cause significant delays in the approval process for ZX002. In addition, as part of the REMS for ZX002, the FDA could require stringent restrictions on the prescribing, distribution, and patient use of the product, which could
significantly impact our ability to commercialize ZX002 and dramatically reduce its market potential.

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Our commercialization partner
for Sumavel DosePro in the European Union and three other countries, Desitin, may not successfully develop, obtain approval for or commercialize Sumavel DosePro in those territories, which may adversely affect our ability to commercialize Sumavel
DosePro both inside and outside the United States.

In March 2008, we entered into a licensing and distribution
agreement with Desitin pursuant to which we granted Desitin the exclusive right under our intellectual property rights related to Sumavel DosePro to develop, use, distribute, sell, offer for sale, and import Sumavel DosePro and any potential
modified versions of Sumavel DosePro in the European Union, Norway, Switzerland and Turkey. In that regard, Desitin is not obligated under the agreement to pursue regulatory approval or commercialization of Sumavel DosePro in any of these countries
except for Germany. Since we will depend on Desitin to develop, obtain regulatory approval for and, if regulatory approval is granted, commercialize Sumavel DosePro in these countries, we will have limited control over the success of Desitins
development, regulatory approval and commercialization efforts. Desitin submitted a Marketing Authorization Application for Sumavel DosePro to the Federal Institute for Drugs and Medical Devices (Bundesinstitut für Arzneimittel und
Medizinprodukte (BfArM)) in Germany, the reference member state, through the Decentralized Procedure in October 2009, following completion of a European pivotal bioequivalence trial comparing needle-free Sumavel DosePro to a traditional needle-based
autoinjector, Imigran-Inject, the European brand of Imitrex STATdose. However, any additional clinical studies Desitin may be required to conduct as part of the regulatory approval process may not corroborate the results of the clinical studies we
have conducted or may have adverse results or effects on our ability to maintain regulatory approvals in the United States or obtain them in other countries. In addition, although we believe that the U.S. market represents the largest commercial
opportunity for Sumavel DosePro, Desitin may not develop Sumavel DosePro as fast or generate as large of a market as we would like or as the market may expect and Desitin may not seek to develop, obtain approval for or commercialize Sumavel DosePro
in countries for which it has exclusive rights, other than in Germany, where Desitin is required to develop, seek approval for and commercialize Sumavel DosePro. Any failure by Desitin to successfully commercialize Sumavel DosePro or to successfully
obtain applicable foreign regulatory approval for Sumavel DosePro would limit our opportunity to receive revenue from the territories licensed to Desitin. Furthermore, negative developments occurring in those territories controlled by Desitin could
have a negative impact on physician and patient impressions of our product in the United States and elsewhere.

Our failure to
successfully establish new partnerships with pharmaceutical companies or contract sales organizations to co-promote any additional product candidates that may receive regulatory approval may impair our ability to effectively market and sell such
product candidates.

Major pharmaceutical companies usually employ groups of sales representatives numbering in the
thousands to call on the large number of primary care physicians. In connection with the launch of Sumavel DosePro in January 2010 we built a sales and marketing organization to promote Sumavel DosePro in the United States, including a focused sales
force of approximately 80 representatives primarily targeting neurologists and other key prescribers of migraine medications, including headache clinics and headache specialists. In addition, in July 2009, we entered into an exclusive agreement with
Astellas under which Sumavel DosePro is also being marketed by Astellas in the United States and promoted primarily to primary care physicians, OB/GYNs, emergency medicine physicians, and urologists by approximately 400 Astellas sales
representatives. In order to expand the market opportunity for any additional product candidates that receive regulatory approval into the broader primary care physician audiences, we will need to continue to expand our sales and marketing personnel
and commercial infrastructure and/or establish partnerships with pharmaceutical companies or contract sales organizations to co-promote such product candidates. We currently, and on an ongoing basis will have to, compete with other pharmaceutical
and biotechnology companies to recruit, hire, train and retain sales and marketing personnel. We also face competition in our search for collaborators and potential co-promoters. To the extent we rely on additional third parties to commercialize any
product candidates that may receive regulatory approval, we are likely to receive less revenues than if

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we commercialized these products ourselves. Further, by entering into strategic partnerships or similar arrangements, we may rely in part on such third parties for financial and commercialization
resources. Even if we are able to identify suitable partners to assist in the commercialization of our product candidates, they may fail to devote the resources necessary to realize the full commercial potential of our products. In addition, we may
lack the financial and managerial resources to increase the size of our sales and marketing organization to adequately commercialize any product candidates that may be approved, and any increase in our sales force would result in an increase in our
expenses, which could be significant before we generate revenues from any newly approved product candidate. If we are unable to expand our sales and marketing infrastructure or enter into a third-party arrangement, we would not be able to
successfully commercialize any approved products. Even if we are able to expand our sales and marketing personnel or successfully establish partnership arrangements, such sales force and marketing teams may not be successful in commercializing our
products, which would adversely affect our ability to generate revenue for such products, which will have a material adverse effect on our business, results of operations, financial condition and prospects.

Our failure to successfully acquire, develop and market additional product candidates or approved products would impair our ability to grow our
business. In that regard, our DosePro delivery system cannot be used with drug formulation volumes greater than 0.5 mL, which will likely limit its use with drugs requiring larger formulation volumes.

As part of our growth strategy we intend to seek to expand our product pipeline by exploring acquisition or in-licensing opportunities of
proven drugs that can be paired with our DosePro needle-free drug delivery system. However, the current version of our DosePro drug delivery system cannot be used with drug formulation volumes greater than 0.5 mL. Many marketed and development-stage
injectable products, including most biologics, have formulation volumes greater than 0.5 mL and would require reformulation, if possible, to accommodate the approved doses in smaller volumes that are compatible with DosePro. Any reformulation may
increase the risk of failure during development, extend the development timelines, increase development costs and add complexity to the regulatory approval process and in some cases reformulation may not be possible. If we are not able to identify
additional drug compounds that can be delivered via the current version of our DosePro technology, or if we are unable to successfully develop higher dose versions of this technology, our ability to develop additional product candidates and grow our
business would be adversely affected. We will also seek opportunities to out-license the DosePro technology to partners seeking to enhance, differentiate, or extend the life-cycle of their injectable products. If we are unable to secure partnerships
with companies that have compounds that can be delivered via the current version of our DosePro technology, or if we are unable to successfully develop higher dose versions of this technology, we will not be able to generate revenues from
out-licensing our DosePro technology.

We have initiated early stage design and development of a larger volume, second
generation version of our DosePro technology to accommodate drug formulation volumes greater than 0.5 mL, which if successfully developed, would allow for a broader range of potential applications for our technology. However, the full development of
such technology will require substantial investment and we may consider entering into a third-party collaboration in order to obtain third-party financing to help fully develop such technology. There is no guarantee that we or any potential future
third-party collaborator will be able to successfully develop such a device technology, whether for financial or technical reasons or otherwise.

Furthermore, we intend to in-license, acquire, develop and/or market additional products and product candidates in the areas of pain and central nervous system, or CNS, disorders. Because our internal
research and development capabilities are limited, we may be dependent upon pharmaceutical and biotechnology companies, academic scientists and other researchers to sell or license products or technology to us. The success of this strategy depends
partly upon our ability to identify and select promising pharmaceutical product candidates and products, negotiate licensing or acquisition agreements with their current owners and finance these arrangements.

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The process of
proposing, negotiating and implementing a license or acquisition of a product candidate or approved product is lengthy and complex. Other companies, including some with substantially greater financial, marketing, sales and other resources, may
compete with us for the license or acquisition of product candidates and approved products. We have limited resources to identify and execute the acquisition or in-licensing of third-party products, businesses and technologies and integrate them
into our current infrastructure. Moreover, we may devote resources to potential acquisitions or licensing opportunities that are never completed, or we may fail to realize the anticipated benefits of such efforts. We may not be able to acquire the
rights to additional product candidates, or license the rights to our DosePro technology, on terms that we find acceptable, or at all.

Further, any product candidate that we acquire may require additional development efforts prior to commercial sale, including pre-clinical or clinical testing and approval by the FDA and applicable
foreign regulatory authorities. All product candidates are prone to risks of failure typical of pharmaceutical product development, including the possibility that a product candidate will not be shown to be sufficiently safe and effective for
approval by regulatory authorities. In addition, we cannot provide assurance that any products that we develop or approved products that we acquire will be manufactured or sold profitably or achieve market acceptance.

If we are unable to license or acquire additional product candidates or approved products and successfully develop and commercialize them,
or if we are otherwise unable to pair our DosePro delivery system with other drugs or out-license the DosePro technology to others, it would likely have a material adverse effect on our business, results of operations, financial condition and
prospects.

We have recently substantially increased the size of our organization and may need to continue to increase the size of our
organization, and we may experience difficulties in managing and financing growth.

In a short period of time from
November 2009 until January 2010, we hired approximately 80 field-based sales employees and related sales and managed markets management personnel to complete our commercial infrastructure in order to launch Sumavel DosePro. This additional hiring
contributed to an increase in our full-time employees from 48 as of October 31, 2009 to 145 as of September 30, 2010. We may need to continue to expand our managerial, operational and other resources in order to grow, manage and fund our
existing business. Our management and personnel, systems and facilities currently in place may not be adequate to support this recent and any future growth, and we may be unable to fund the costs and expenses required to increase our necessary
headcount and infrastructure. Our need to effectively manage our operations, any future growth and various projects requires that we:



manage our internal and external commercialization efforts for Sumavel DosePro effectively while carrying out our contractual obligations to Astellas
and other third parties and complying with all applicable laws, rules and regulations;



manage our internal development efforts for ZX002 and our other product candidates effectively while carrying out our contractual obligations to
licensors, collaborators and other third parties and complying with all applicable laws, rules and regulations;

We may be unable to successfully implement or fund these tasks on a larger scale and, accordingly, may not achieve our commercialization and development goals. In addition, our management may have to
divert a disproportionate amount of its attention away from day-to-day activities and towards managing these growth-related activities. Our future financial performance and our ability to execute on our business plan will depend, in part, on our
ability to effectively manage any future growth and our failure to effectively manage any growth could have a material adverse effect on our business, results of operations, financial condition and prospects.

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If we are unable to attract and
retain key personnel, we may not be able to manage our business effectively or develop our product candidates or commercialize our product.

Our success depends on our continued ability to attract, retain and motivate highly qualified management and key clinical development, regulatory, sales and marketing and other personnel. We are highly
dependent on the development, regulatory, commercial and financial expertise of our senior management team. We may not be able to attract or retain qualified management and scientific and clinical personnel in the future due to the intense
competition for qualified personnel among biotechnology, pharmaceutical and other businesses, particularly in the areas in Southern and Northern California, where we currently operate. Our industry has experienced a high rate of turnover of
management personnel in recent years. If we are not able to attract, retain and motivate necessary personnel to accomplish our business objectives, we may experience constraints that will significantly impede the achievement of our development and
commercialization objectives, our ability to raise additional capital and our ability to implement our business strategy. The loss of the services of any members of our senior management team, especially our Chief Executive Officer, Roger L. Hawley,
and President and Chief Operating Officer, Stephen J. Farr, Ph.D., could negatively impact the commercialization of Sumavel DosePro and could delay or prevent the development and commercialization of any other product candidates, including ZX002. In
addition, under the terms of our amended and restated loan and security agreement with Oxford Finance Corporation and Silicon Valley Bank, if our Chief Executive Officer, Chief Financial Officer or President resigns, is terminated or is no longer
actively involved in his or her current position and is not replaced by a person acceptable to our board of directors within 120 days, an event of default would be triggered under the agreement, and the lenders would be able to demand immediate
repayment of all borrowings outstanding under the agreement. Further, if we lose any members of our senior management team, we may not be able to find suitable replacements, and our business may be harmed as a result. In addition to the competition
for personnel, our locations in California in particular are characterized by a high cost of living. As such, we could have difficulty attracting experienced personnel to our company and may be required to expend significant financial resources in
our employee recruitment and retention efforts.

Although we have employment agreements with each of our executive officers,
these agreements are terminable by them at will at any time with or without notice and, therefore, do not provide any assurance that we will be able to retain their services. We do not maintain key man insurance policies on the lives of
our senior management team or the lives of any of our other employees. In addition, we have clinical advisors who assist us in formulating our clinical strategies. These advisors are not our employees and may have commitments to, or consulting or
advisory contracts with, other entities that may limit their availability to us, or may have arrangements with other companies to assist in the development of products that may compete with ours. If we are unable to attract and retain key personnel,
our business, results of operations, financial condition and prospects will be adversely affected.

We may engage in strategic
transactions that could impact our liquidity, increase our expenses and present significant distractions to our management.

From time to time we may consider strategic transactions, such as acquisitions of companies, asset purchases and out-licensing or in-licensing of products, product candidates or technologies. Additional
potential transactions that we may consider include a variety of different business arrangements, including spin-offs, strategic partnerships, joint ventures, restructurings, divestitures, business combinations and investments. Any such transaction
may require us to incur non-recurring or other charges, may increase our near and long-term expenditures and may pose significant integration challenges or disrupt our management or business, which could adversely affect our operations and financial
results. For example, these transactions may entail numerous operational and financial risks, including:



exposure to unknown liabilities;



disruption of our business and diversion of our managements time and attention in order to develop acquired products, product candidates or
technologies;

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

incurrence of substantial debt or dilutive issuances of equity securities to pay for acquisitions;



higher than expected acquisition and integration costs;



write-downs of assets or goodwill or impairment charges;



increased amortization expenses;



difficulty and cost in combining the operations and personnel of any acquired businesses with our operations and personnel;



impairment of relationships with key suppliers or customers of any acquired businesses due to changes in management and ownership; and



inability to retain key employees of any acquired businesses.

Accordingly, although there can be no assurance that we will undertake or successfully complete any transactions of the nature described
above, any transactions that we do complete could have a material adverse effect on our business, results of operations, financial condition and prospects.

If we are unable to achieve and maintain adequate levels of coverage and reimbursement for Sumavel DosePro, ZX002, if approved, or any of our other product candidates for which we may receive
regulatory approval on reasonable pricing terms, their commercial success may be severely hindered.

Successful sales
of our products depend on the availability of adequate coverage and reimbursement from third-party payors. Patients who are prescribed medicine for the treatment of their conditions generally rely on third-party payors to reimburse all or part of
the costs associated with their prescription drugs. Adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and Medicaid, and commercial payors is critical to new product acceptance. Coverage decisions may depend
upon clinical and economic standards that disfavor new drug products when more established or lower cost therapeutic alternatives are already available or subsequently become available. Assuming coverage is approved, the resulting reimbursement
payment rates might not be adequate or may require co-payments that patients find unacceptably high. Patients are unlikely to use our products unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of
our products.

In addition, the market for our products will depend significantly on access to third-party payors drug
formularies, or lists of medications for which third-party payors provide coverage and reimbursement. The industry competition to be included in such formularies often leads to downward pricing pressures on pharmaceutical companies. Also,
third-party payors may refuse to include a particular branded drug in their formularies or otherwise restrict patient access to a branded drug when a less costly generic equivalent or other alternative is available.

Third-party payors, whether foreign or domestic, or governmental or commercial, are developing increasingly sophisticated methods of
controlling healthcare costs. In addition, in the United States, no uniform policy of coverage and reimbursement for drug products exists among third-party payors. Therefore, coverage and reimbursement for drug products can differ significantly from
payor to payor.

Further, we believe that future coverage and reimbursement will likely be subject to increased restrictions
both in the United States and in international markets. Third-party coverage and reimbursement for Sumavel DosePro or any of our other product candidates for which we may receive regulatory approval may not be available or adequate in either the
United States or international markets, which could have a material adverse effect on our business, results of operations, financial condition and prospects.

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We face potential product
liability exposure, and if successful claims are brought against us, we may incur substantial liability if our insurance coverage for those claims is inadequate.

The commercial use of our product and clinical use of our product and product candidates expose us to the risk of product liability claims. This risk exists even if a product is approved for commercial
sale by the FDA and manufactured in facilities licensed and regulated by the FDA, such as the case with Sumavel DosePro, or an applicable foreign regulatory authority. Our product and product candidates are designed to affect important bodily
functions and processes. Any side effects, manufacturing defects, misuse or abuse associated with Sumavel DosePro or our product candidates could result in injury to a patient or even death. For example, because our DosePro technology is designed to
be self-administered by patients, it is possible that a patient could fail to follow instructions and as a result apply a dose in a manner that results in injury. In addition, ZX002 is an opioid pain reliever that contains hydrocodone, which
is a regulated controlled substance under the Controlled Substances Act of 1970, or CSA, and could result in harm to patients relating to its potential for abuse. In addition, a liability claim may be brought against us even if our
product or product candidates merely appear to have caused an injury. Product liability claims may be brought against us by consumers, health care providers, pharmaceutical companies or others selling or otherwise coming into contact with our
product candidates, among others. If we cannot successfully defend ourselves against product liability claims we will incur substantial liabilities. In addition, regardless of merit or eventual outcome, product liability claims may result in:



the inability to commercialize our product or product candidates;



decreased demand for our product or product candidates;



impairment of our business reputation;



product recall or withdrawal from the market;



withdrawal of clinical trial participants;



costs of related litigation;



distraction of managements attention from our primary business;



substantial monetary awards to patients or other claimants; or



loss of revenues.

We have obtained product liability insurance coverage for commercial product sales and clinical trials with a $5 million per occurrence and a $5 million annual aggregate coverage limit. Our
insurance coverage may not be sufficient to cover all of our product liability related expenses or losses and may not cover us for any expenses or losses we may suffer. Moreover, insurance coverage is becoming increasingly expensive, and, in the
future, we may not be able to maintain insurance coverage at a reasonable cost, in sufficient amounts or upon adequate terms to protect us against losses due to product liability. If we determine that it is prudent to increase our product liability
coverage based on sales of Sumavel DosePro, approval of ZX002 or otherwise, we may be unable to obtain this increased product liability insurance on commercially reasonable terms or at all. Large judgments have been awarded in class action or
individual lawsuits based on drugs that had unanticipated side effects, including side effects that are less severe than those of Sumavel DosePro and our product candidates. A successful product liability claim or series of claims brought against us
could cause our stock price to decline and, if judgments exceed our insurance coverage, could decrease our cash and have a material adverse affect our business, results of operations, financial condition and prospects.

Our business and operations would suffer in the event of system failures.

Despite the implementation of security measures, our internal computer systems and those of our current and any future partners,
contractors and consultants are vulnerable to damage from computer

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viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. While we have not experienced any such material system failure, accident or security
breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our commercialization activities, drug development programs and our business operations. For example, the loss of
clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we rely on a large number of third parties to
supply components for and manufacture our product and product candidates, warehouse and distribute Sumavel DosePro and conduct clinical trials, and similar events relating to their computer systems could also have a material adverse effect on our
business. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further
development and commercialization of our product and product candidates could be delayed.

We may be adversely affected by earthquakes
or other natural disasters and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.

Our corporate headquarters and other facilities are located in San Diego and the San Francisco Bay Area, which in the past have both experienced severe earthquakes. We do not carry earthquake insurance.
As a result, earthquakes or other natural disasters could severely disrupt our operations, and have a material adverse effect on our business, results of operations, financial condition and prospects.

Our enterprise financial systems are located in our San Diego, California headquarters. Our manufacturing resource planning and enterprise
quality systems are located in our Emeryville, California facility. If a disaster, power outage or other event occurred that prevented us from using all or a significant portion of our headquarters or our Emeryville facility, that damaged critical
infrastructure, such as enterprise financial systems or manufacturing resource planning and enterprise quality systems, or that otherwise disrupted operations at either location, it may be difficult or, in certain cases, impossible for us to
continue our business for a substantial period of time. The disaster recovery and business continuity plans we have in place currently are limited and are unlikely to prove adequate in the event of a serious disaster or similar event. We may incur
substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans which, particularly when taken together with our lack of earthquake insurance, could have a material adverse effect on our business.

Our business involves the use of hazardous materials and we and our third-party manufacturers and suppliers must comply with
environmental laws and regulations, which can be expensive and restrict how we do business.

Our research and
development activities and our third-party manufacturers and suppliers activities involve the controlled storage, use and disposal of hazardous materials owned by us, including the components of our product and product candidates and
other hazardous compounds. We and our manufacturers and suppliers are subject to laws and regulations governing the use, manufacture, storage, handling and disposal of these hazardous materials. In some cases, these hazardous materials and various
wastes resulting from their use are stored at our and our manufacturers facilities pending use and disposal. We cannot completely eliminate the risk of contamination, which could cause an interruption of our commercialization efforts, research
and development efforts and business operations, injury to our employees and others, environmental damage resulting in costly clean-up and liabilities under applicable laws and regulations governing the use, storage, handling and disposal of these
materials and specified waste products. Although we believe that the safety procedures utilized by our third-party manufacturers for handling and disposing of these materials generally comply with the standards prescribed by these laws and
regulations, we cannot guarantee that this is the case or eliminate the risk of accidental contamination or injury from these materials. In such an event, we may be held liable for any resulting damages and such liability could exceed our resources.
We do not currently carry biological or hazardous waste insurance coverage.

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In connection with the reporting
of our financial condition and results of operations, we are required to make estimates and judgments which involve uncertainties, and any significant differences between our estimates and actual results could have an adverse impact on our financial
position, results of operations and cash flows.

Our discussion and analysis of our financial condition and results of
operations are based on our financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of these financial statements requires us to make estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosure of contingent assets and liabilities. In particular, as part of our revenue recognition policy, our estimates of product returns, rebates
and chargebacks require our most subjective and complex judgment due to the need to make estimates about matters that are inherently uncertain. Any significant differences between our actual results and our estimates and assumptions could negatively
impact our financial position, results of operations and cash flows.

Changes in accounting standards and their interpretations could
adversely affect our operating results.

GAAP are subject to interpretation by the Financial Accounting Standards
Board, the American Institute of Certified Public Accountants, the Securities and Exchange Commission, or SEC, and various other bodies that promulgate and interpret appropriate accounting principles. These principles and related implementation
guidelines and interpretations can be highly complex and involve subjective judgments. A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions
completed before the announcement of a change.

Fluctuations in the value of the Euro or U.K. pound sterling could negatively impact our
results of operations and increase our costs.

Payments to our material suppliers and contract manufactures are
denominated in the Euro and U.K. pounds sterling. Our reporting currency is the U.S. dollar and to date all of the revenues generated by sales of Sumavel DosePro have been in U.S. dollars. For the nine months ended September 30, 2010, $25.4
million (based on exchange rates as of September 30, 2010) of our materials, contract manufacturing costs and other manufacturing-related costs were denominated in foreign currencies. As a result, we are exposed to foreign exchange risk, and our
results of operations may be negatively impacted by fluctuations in the exchange rate between the U.S. dollar and the Euro or U.K. pound sterling. A significant appreciation in the Euro or U.K. pound sterling relative to the U.S. dollar will result
in higher expenses and cause increases in our net losses. Likewise, to the extent that we generate any revenues denominated in foreign currencies, or become required to make payments in other foreign currencies, fluctuations in the exchange rate
between the U.S. dollar and those foreign currencies could also negatively impact our results of operations. We currently have not entered into any foreign currency hedging contracts to reduce the effect of changes in foreign currency exchange
rates, and foreign currency hedging is inherently risky and may result in unanticipated losses.

Our operating results are partially
dependent on freight costs and our costs may increase significantly if we are unable to ship and transport finished products efficiently and economically across long distances and international borders.

Our Sumavel DosePro product is manufactured in Europe and we transport significant volumes of that product across long distances and
international borders. As a result, our operating results can be affected by changes in transportation costs. We generally ship our product by air freight, and freight rates can vary significantly due to a large number of factors beyond our control,
including changes in fuel prices or general economic conditions. If demand for air freight should increase substantially, it could make it difficult for us to procure transportation space at prices we consider acceptable.

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Because our products
must cross international borders, we are subject to risk of delay due to customs inspection, if our documentation does not comply with customs rules and regulations or for similar reasons. In addition, any increases in customs duties or tariffs, as
a result of changes to existing trade agreements between countries or otherwise, could increase our costs or the final cost of our products to our customers or increase our expenses. The laws governing customs and tariffs in many countries are
complex, subject to many interpretations and often includes substantial penalties for noncompliance.

Risks Related to Our
Financial Position and Capital Requirements

We have never generated net income or positive cash flow from operations and are
dependent upon external sources of financing to fund our business and development.

We are at an early stage of
commercialization, having launched our only approved product, Sumavel DosePro, in January 2010. Without a long history of sales, we may not accurately predict future sales, and we may never be able to significantly increase these sales, especially
in light of our reliance on our partnership with Astellas to co-promote Sumavel DosePro. We have financed our operations almost exclusively through private placements of preferred stock and debt and have incurred losses and negative cash flow from
operations in each year since our inception. Our net loss applicable to common stockholders was $46.0 million in 2007, $45.6 million in 2008, $45.9 million in 2009 and $71.4 million for the nine months ended September 30, 2010, and our
cash used in operating activities was $26.8 million in 2007, $41.3 million in 2008, $32.4 million in 2009 and $58.5 million for the nine months ended September 30, 2010. As of September 30, 2010, we had an accumulated deficit of
$196.0 million. These losses and negative cash flow from operations have had a material adverse effect on our stockholders equity and working capital. Further, despite the revenues from Sumavel DosePro, we expect our losses to continue
for at least the next several years as a result of the cost of the sales and marketing expense associated with Sumavel DosePro and the increasing development expenses in connection with our ongoing Phase 3 clinical trials for ZX002. In
addition, if we obtain regulatory approval for ZX002 or any of our other product candidates, we expect to incur significant sales, marketing and manufacturing expenses as well as continued development expenses. As a result, we are and will remain
dependent upon external sources of financing to finance our business and the development and commercialization of our approved product and product candidates. We cannot assure you that debt or equity financing will be available to us in amounts, at
times or on terms that will be acceptable to us, or at all. Any shortfall in our cash resources could require that we delay or abandon certain development and commercialization activities and could otherwise have a material adverse effect on our
business, results of operations, financial condition and prospects.

Our independent registered public accounting firm has expressed
substantial doubt as to our ability to continue as a going concern.

In its report accompanying our audited financial
statements for the year ended December 31, 2009, our independent registered public accounting firm included an explanatory paragraph stating that our recurring losses from operations and lack of sufficient working capital raise substantial
doubt as to our ability to continue as a going concern. A going concern opinion could impair our ability to finance our operations through the sale of debt or equity securities or commercial bank loans. Our ability to continue as a going
concern will depend, in large part, on our ability to generate positive cash flow from operations and obtain additional financing, neither of which is certain. If we are unable to achieve these goals, our business would be jeopardized and we may not
be able to continue operations and may have to liquidate our assets and may receive less than the value at which those assets are carried on our financial statements, and it is likely that investors will lose all or a part of their investment. In
addition, our amended loan and security agreement with Oxford Finance Corporation and Silicon Valley Bank includes a covenant that the audit reports accompanying our annual financial statements for fiscal year 2010 and thereafter not include a going
concern qualification and any breach of that covenant would permit the lenders to demand immediate repayment of all loans outstanding under the agreement and to seize and sell the collateral.

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Our level of indebtedness could
adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry and prevent us from meeting our obligations.

As of September 30, 2010, the principal amount of our total indebtedness was approximately $43.7 million. We have and expect to continue
to make borrowings under our $10.0 million revolving credit facility to fund working capital and other cash needs and we may incur substantial additional indebtedness in the future, both under our $10.0 million revolving credit facility and any
other debt facilities we may enter into in the future. Our outstanding debt and related debt service obligations could have important adverse consequences to us, including:



heightening our vulnerability to downturns in our business or our industry or the general economy and restricting us from making improvements or
acquisitions, or exploring business opportunities;



requiring a significant portion of our available cash to be dedicated to the payment of principal and interest on our indebtedness, therefore reducing
our ability to use our available cash to fund our operations, capital expenditures and future business opportunities;



limiting our ability to obtain additional financing for working capital, capital expenditures, debt service requirements, acquisitions and general
corporate or other purposes;



limiting our ability to adjust to changing market conditions and placing us at a competitive disadvantage compared to our competitors who have greater
capital resources; and



subjecting us to financial and other restrictive covenants in our debt instruments, the failure with which to comply could result in an event of
default under the applicable debt instrument that allows the lender to demand immediate repayment of the related debt.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we may be forced to reduce or delay product development, sales and marketing, capital and other expenditures,
sell assets, seek additional capital or restructure or refinance our indebtedness. These alternative measures may not be successful and may not permit us to meet our scheduled debt service obligations. This risk is increased by the fact that
borrowings under certain of our credit facilities bear interest at a variable rates, exposing us to the risk that the amount of cash required to pay interest will increase to the extent that market interest rates increase.

Our debt instruments contain a number of financial covenants and other provisions, including a requirement that we attain specified future levels
of revenues, which, if violated, could result in the immediate acceleration of our outstanding indebtedness.

Our $35.0
million amended and restated loan and security agreement with Oxford Finance Corporation and Silicon Valley Bank includes covenants requiring, among other things, that (1) we achieve, as of the last day of each month measured on a trailing
three-month basis, actual revenues of at least a specified percentage of our projected revenue as provided to Oxford Finance Corporation and Silicon Valley Bank in the event we fail to maintain a liquidity ratio (defined, in general, as the ratio of
(a) cash and cash equivalents deposited with Silicon Valley Bank plus unused borrowing capacity under that agreement to (b) all debt, capital lease obligations and contingent obligations owed to the lenders) of 1.25 to 1.00, (2) we complete an
equity or subordinated debt financing of at least $10.0 million prior to November 30, 2010 and (3) the audit report accompanying our year-end financial statements for fiscal year 2010 and thereafter not include a going concern qualification. As
discussed above, the audit report accompanying our 2009 financial statements includes a going concern qualification and, as a result, our results of operations and financial condition will have to improve to a point where our auditors can deliver
their audit report without this qualification in order to avoid a breach of this covenant. In addition, the amended and restated loan and security agreement prohibits the occurrence of a change in control (as defined in the agreement) of our
company. The agreement provides that an event of default will occur if,

35

among other customary events of default, (1) there is a material adverse change in our business, operations or condition (financial or otherwise) or material impairment in the prospects of
us repaying any portion of our obligations under the agreement, (2) there is a material impairment in the value of the collateral pledged to secure our obligations under the agreement, (3) we default in the payment of any amount payable under the
agreement when due, or (4) we breach any covenant in the agreement (subject to a grace period in some cases). Our loan and security agreement with General Electric Capital Corporation, or GE Capital, does not have any financial covenants, but
it provides that an event of default will occur if, among other things, we fail to pay amounts owing under the agreement when due or if a material adverse change in our business occurs. In both 2009 and 2010, we were required to obtain amendments or
waivers under our credit facilities, and we may in the future need to obtain waivers or amendments under our credit facilities or other debt instruments, in order to avoid a breach or default, particularly if our business deteriorates or does not
perform in accordance with our expectations.

Our $35.0 million amended and restated loan and security agreement with Oxford
Finance Corporation and Silicon Valley Bank is secured by our personal property (including, among other things, accounts receivable, equipment, inventory, contract rights, rights to payment of money, license agreements, general intangibles and
cash), but excluding, among other things, copyrights, patents, patent applications, trademarks, service marks, trade secret rights and equipment pledged to secure the GE Capital credit facility, and our loan and security agreement with GE Capital is
secured by a pledge of specific equipment used to manufacture DosePro. Each agreement contains provisions which allow the lenders to demand immediate repayment of the debt and to seize and sell the collateral to pay that debt upon the occurrence of
an event of default under the agreement. If we are unable to pay the indebtedness secured by collateral when due, whether at maturity or if declared due and payable by the lender following a default, the lender generally has the right to seize and
sell the collateral securing that indebtedness.

There can be no assurance that we will not breach the covenants or other terms
of, or that an event of default will not occur under, our credit facilities or any other debt instruments and, if a breach or event of default occurs, there can be no assurance that we will be able to obtain necessary waivers or amendments from the
lenders or refinance the related indebtedness on terms we find acceptable, or at all. As a result, any failure to pay our debt service obligations when due, any breach or default of our covenants or other obligations under debt instruments, or any
other event that allows any lender to demand immediate repayment of borrowings, could have a material adverse effect on our business, results of operations, financial condition and prospects.

We will likely need additional funding and may be unable to raise capital when needed, which would force us to delay, reduce or eliminate our product development programs or commercialization
efforts.

Our operations have consumed substantial amounts of cash since inception. To date, our operations have been
primarily financed through the proceeds from the issuance of our preferred stock and borrowings under our loan agreements with GE Capital and Oxford Finance Corporation, Silicon Valley Bank and CIT Corporation. We expect to continue to spend
substantial amounts on commercialization activities for Sumavel DosePro, development activities for ZX002 and our other product candidates and, if ZX002 or our other product candidates are approved, the commercialization of those products, including
significant amounts on conducting clinical trials, manufacturing, clinical supplies and expanding our product development and sales and marketing programs. Developing products for the pain-relief market, conducting clinical trials, establishing
outsourced manufacturing relationships and successfully manufacturing and marketing Sumavel DosePro and any other approved drugs is expensive and we expect that our monthly cash used by operations will increase substantially for the next several
years. We will likely need to raise additional capital to:



maintain and continue to increase our sales and marketing activities for Sumavel DosePro;



qualify secondary sources for the manufacturing of Sumavel DosePro;

36



fund our operations and continue to conduct clinical trials of ZX002 and any other product candidate to support potential regulatory approval of
marketing applications; and



commercialize any of our product candidates or any products or product candidates that we may develop, in-license or otherwise acquire, if any of these
product candidates receive regulatory approval.

In addition, our estimates of the amount of cash necessary
to fund our business and development and commercialization activities may prove to be wrong, and we could spend our available financial resources much faster than we currently expect. Our future funding requirements will depend on many factors,
including, but not limited to:



the commercial success of Sumavel DosePro;



the timing of regulatory approval, if granted, of ZX002 or any other product candidates;



the rate of progress and cost of our clinical trials and other product development programs for ZX002 and our other product candidates and any other
product candidates that we may develop, in-license or acquire;



the costs of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights associated with Sumavel DosePro,
ZX002 and any of our other product candidates;



the costs and timing of completion of outsourced commercial manufacturing supply arrangements for any product candidate;



the costs of maintaining and expanding our sales and marketing infrastructure or establishing distribution capabilities, should we elect to do so;



the effect of competing technological and market developments; and



the terms and timing of any additional collaborative, licensing, co-promotion or other arrangements that we may establish.

Until we can generate a sufficient amount of product revenue and cash flow from operations and achieve
profitability, we expect to finance future cash needs through public or private equity offerings, debt financings, receivables or royalty financings or corporate collaboration and licensing arrangements. If we raise additional funds by issuing
equity securities, substantial dilution to existing stockholders would result. If we raise additional funds by incurring debt financing, the terms of the debt may involve significant cash payment obligations as well as covenants and specific
financial ratios that may restrict our ability to operate our business. We cannot be certain that additional funding will be available on acceptable terms, or at all. If adequate funds are not available, we may be required to significantly delay,
reduce the scope of or eliminate one or more of our development programs or our commercialization efforts. We also may be required to relinquish, license or otherwise dispose of rights to product candidates or products that we would otherwise seek
to develop or commercialize ourselves on terms that are less favorable than might otherwise be available. Any of the foregoing could have a material adverse effect on our business, results of operations, financial condition and prospects.

Our results of operations and liquidity needs could be materially negatively affected by market fluctuations and economic downturn.

Our results of operations and liquidity could be materially negatively affected by economic conditions generally, both
in the U.S. and elsewhere around the world. Domestic and international equity and debt markets have experienced and may continue to experience heightened volatility and turmoil based on domestic and international economic conditions and concerns. In
the event these economic conditions and concerns continue or worsen and the markets continue to remain volatile, our results of operations and liquidity could be adversely affected by those factors in many ways, including

37

making it more difficult for us to raise funds if necessary, and our stock price may decline. In addition, we maintain significant amounts of cash and cash equivalents at one or more financial
institutions that are not federally insured. If economic instability continues, we cannot provide assurance that we will not experience losses on these investments.

Raising additional funds by issuing securities may cause dilution to existing stockholders and raising funds through lending and licensing arrangements may restrict our operations or require us to
relinquish proprietary rights.

We may raise additional funds through public or private equity offerings, debt
financings, receivables or royalty financings or corporate collaboration and licensing arrangements. To the extent that we raise additional capital by issuing equity securities or convertible debt, your ownership interest in us will be diluted. Debt
financing typically contains covenants that restrict operating activities. Our loan and security agreement with Oxford Finance Corporation and Silicon Valley Bank is secured by our personal property, including, among other things, accounts
receivable, equipment, inventory, contract rights, rights to payment of money, license agreements, general and tangibles and cash, but excluding, among other things, copyrights, patents, patent applications, trademarks, service markets, trade secret
rights and equipment pledged to secure the GE Capital loan facility and our loan and security agreement with GE Capital is secured by a pledge of specific equipment used to manufacture DosePro. Each such agreement contains provisions which allow
such lenders to accelerate the debt and seize and sell the collateral if, among other things, we fail to pay principal or interest when due or breach our obligations under the agreements or if a material adverse change in our business or any other
event of default occurs. Any future debt financing we enter into may involve more onerous covenants that restrict our operations, may be secured by some or all of our assets and will likely allow the lenders to accelerate the debt and seize and sell
any collateral following a default. Our obligations under these loan and security agreements or any future debt financing will need to be repaid, which creates additional financial risk for our company, particularly if our business or prevailing
financial market conditions are not conducive to paying-off or refinancing our outstanding debt obligations.

If we raise
additional funds through collaboration, licensing or other similar arrangements, it may be necessary to relinquish potentially valuable rights to our current product or product candidates or proprietary technologies, or grant licenses on terms that
are not favorable to us. If adequate funds are not available, our ability to achieve profitability or to respond to competitive pressures would be significantly limited and we may be required to delay, significantly curtail or eliminate the
commercialization and development of our product or product candidates.

Our ability to utilize our net operating loss and research and
development income tax credit carryforwards may be limited.

Under Section 382 of the Internal Revenue Code of
1986, as amended, or the IRC, substantial changes in our ownership may limit the amount of net operating loss and research and development income tax credit carryforwards that could be utilized annually in the future to offset taxable income, if
any. Specifically, this limitation may arise in the event of a cumulative change in ownership of our company of more than 50% within a three-year period. Any such annual limitation may significantly reduce the utilization of the net operating loss
carryforwards before they expire. We performed a Section 382 and 383 analysis and determined that we had one ownership change, as defined by IRC Sections 382 and 383, which occurred in August 2006 upon the issuance of Series A-1 preferred
shares. As a result of this ownership change, we reduced our net operating loss carryforwards by $1.9 million and research and development income tax credit by $8,000. The closing of this offering, together with private placements and other
transactions that have occurred since our inception, may trigger an ownership change pursuant to Sections 382 and 383, which could further limit the amount of net operating loss carryforwards that could be utilized annually in the future to offset
taxable income, if any. Any such limitation, whether as the result of prior private placements, sales of common stock by our existing stockholders or additional sales of common stock by us after this offering, could have an adverse effect on our
results of operations.

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Risks Related to
Regulation of our Product and Product Candidates

Our currently marketed product, Sumavel DosePro, is and any of our other product
candidates that receive regulatory approval will be subject to ongoing and continued regulatory review, which may result in significant expense and limit our ability to commercialize such products.

Even after we achieve U.S. regulatory approval for a product, the FDA may still impose significant restrictions on the approved indicated
uses for which the product may be marketed or on the conditions of approval. For example, a products approval may contain requirements for potentially costly post-approval studies and surveillance, including Phase 4 clinical trials, to monitor
the safety and efficacy of the product. We will also be subject to ongoing FDA obligations and continued regulatory review with respect to the manufacturing, processing, labeling, packaging, distribution, adverse event reporting, storage,
advertising, promotion and recordkeeping for the product. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMPs and with GCPs and good laboratory
practices, which are regulations and guidelines enforced by the FDA for all of our products in clinical and pre-clinical development, and for any clinical trials that we conduct post-approval. To the extent that a product is approved for sale in
other countries, we may be subject to similar restrictions and requirements imposed by laws and government regulators in those countries.

In the case of ZX002 and any other product candidates or products containing controlled substances, we and our contract manufacturers will also be subject to ongoing DEA regulatory obligations, including,
among other things, annual registration renewal, security, recordkeeping, theft and loss reporting, periodic inspection and annual quota allotments for the raw material for commercial production of our products. In addition, manufacturers of drug
products and their facilities are subject to continual review and periodic inspections by the FDA and other regulatory authorities for compliance with cGMP regulations, QSR requirements for medical device components or similar requirements, if
applicable. If we or a regulatory agency discovers previously unknown problems with a product, such as adverse events of unanticipated severity or frequency, or problems with the facility where, or processes by which, the product is manufactured, a
regulatory agency may impose restrictions on that product, the manufacturer or us, including requiring product recall, notice to physicians, withdrawal of the product from the market or suspension of manufacturing. In that regard, because all of our
contract manufacturers for Sumavel DosePro are located outside the United States, they may be subject to foreign laws and regulations governing the manufacture of drugs and devices, and any failure by them to comply with those laws and regulations
may delay or interrupt supplies of our product.

If we, our product or product candidates or the manufacturing facilities for
our product or product candidates fail to comply with applicable regulatory requirements, a regulatory agency may:



impose restrictions on the marketing or manufacturing of the product, suspend or withdraw product approvals or revoke necessary licenses;

impose injunctions, suspensions or revocations of necessary approvals or other licenses;



impose fines or other civil or criminal penalties;



suspend any ongoing clinical trials;



deny or reduce quota allotments for the raw material for commercial production of our controlled substance products;



delay or refuse to approve pending applications or supplements to approved applications filed by us;

39



refuse to permit drugs or precursor chemicals to be imported or exported to or from the United States;



suspend or impose restrictions on operations, including costly new manufacturing requirements; or



seize or detain products or require us to initiate a product recall.

In addition, our product labeling, advertising and promotion are subject to regulatory requirements and continuing regulatory review. The
FDA strictly regulates the promotional claims that may be made about prescription drug products. In particular, a drug may not be promoted for uses that are not approved by the FDA as reflected in the products approved labeling, although the
FDA does not regulate the prescribing practices of physicians. The FDA and other agencies actively enforce the laws and regulations prohibiting the promotion of off-label uses, and a company that is found to have improperly promoted off-label uses
may be subject to significant liability, including substantial monetary penalties and criminal prosecution.

The FDAs
regulations, policies or guidance may change and new or additional statutes or government regulations may be enacted that could prevent or delay regulatory approval of our product candidates or further restrict or regulate post-approval activities.
We cannot predict the likelihood, nature or extent of adverse government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are not able to achieve and maintain regulatory
compliance, we may not be permitted to market our drugs, which would adversely affect our ability to generate revenue and achieve or maintain profitability.

Sumavel DosePro, ZX002 and our other product candidates may cause undesirable side effects or have other unexpected properties that could result in post-approval regulatory action.

If we or others identify undesirable side effects, or other previously unknown problems, caused by our products, other
products or our product candidates with the same or related active ingredients, after obtaining U.S. regulatory approval, a number of potentially significant negative consequences could result, including:



regulatory authorities may withdraw their approval of the product;



regulatory authorities may require us to recall product;



regulatory authorities may require the addition of warnings in the product label or narrowing of the indication in the product label;



we may be required to create a Medication Guide outlining the risks of such side effects for distribution to patients;



we may be required to change the way the product is administered or modify the product in some other way;



the FDA may require us to conduct additional clinical trials or costly post-marketing testing and surveillance to monitor the safety or efficacy of the
product;



we could be sued and held liable for harm caused to patients; and



our reputation may suffer.

The most common treatment-emergent adverse reactions (reported by at least 5% of patients) for sumatriptan injection as described in the Sumavel DosePro Prescribing Information summarizing two
large placebo-controlled clinical trials were injection site reaction (59%), atypical sensations (42%), dizziness (12%), flushing (7%), chest discomfort (5%), weakness (5%), and neck pain/stiffness (5%).

While the adverse reaction profile for ZX002 has not yet been fully characterized in Phase 3 clinical trials, in two completed Phase 2
studies of ZX002 patients experienced mild to moderate adverse

40

events, such as nausea, vomiting, headache, dizziness, sweating, constipation and drowsiness, which are similar to the reported effects of opioids currently prescribed for chronic pain.

Any of the above events resulting from undesirable side effects or other previously unknown problems could prevent us from
achieving or maintaining market acceptance of the affected product and could substantially increase the costs of commercializing our product candidates.

Our development and commercialization strategy for ZX002 depends upon the FDAs prior findings of safety and effectiveness of ZX002 based on data not developed by us, but which the FDA may rely
upon in reviewing our NDA.

The Drug Price Competition and Patent Term Restoration Act of 1984, also known as the
Hatch-Waxman Amendments, added Section 505(b)(2) to the FFDCA. Section 505(b)(2) permits the filing of an NDA where at least some of the information required for approval comes from studies not conducted by or for the applicant and for
which the applicant has not obtained a right of reference. Under this statutory provision, the FDA may rely, for purposes of approving an NDA, on findings of safety and effectiveness based on data not developed by the filer of the NDA. Similar to
Sumavel DosePro, we intend to submit the NDA for ZX002 under Section 505(b)(2), and as such the NDA will rely, in part, on the FDAs previous findings of safety and effectiveness for hydrocodone. Even though we may be able to take
advantage of Section 505(b)(2) to support potential U.S. approval for ZX002, the FDA may require us, and did require us with respect to Sumavel DosePro, to perform additional studies or measurements to support approval. In addition, the
FDAs interpretation and use of Section 505(b)(2) has been controversial and has previously been challenged in court, but without a definitive ruling on the propriety of the FDAs approach. Future challenges, including a direct
challenge to the approval of our products, may be possible and, if successful, could limit or eliminate our ability to rely on the Section 505(b)(2) pathway for the approval of our products. Such a result could require us to conduct additional
testing and costly clinical trials, which could substantially delay or prevent the approval and launch of our products.

ZX002 will be
subject to DEA regulations and, failure to comply with these regulations, or the cost of compliance with these regulations, may adversely affect our business.

ZX002 contains hydrocodone, a regulated controlled substance under the CSA, which establishes, among other things, certain registration, production quotas, security, recordkeeping,
reporting, import, export and other requirements administered by the DEA. The DEA regulates controlled substances as Schedule I, II, III, IV or V substances. Schedule I substances by definition have no established medicinal use and may not
be marketed or sold in the United States. A pharmaceutical product may be listed as Schedule II, III, IV or V, with Schedule II substances considered to present the highest risk of abuse and Schedule V substances the lowest relative
risk of abuse among such substances. ZX002, because it is a single-entity hydrocodone product, is expected to be regulated by the DEA as a Schedule II controlled substance under the CSA. All Schedule II substance prescriptions, such
as prescriptions for ZX002, must be in writing and signed by a physician, physically presented to a pharmacist and may not be refilled without a new prescription.

The manufacture, shipment, storage, sale and use, among other things, of controlled substances that are pharmaceutical products are subject to a high degree of regulation, including security,
record-keeping and reporting obligations enforced by the DEA. Our failure to comply with these requirements could result in the loss of our DEA registration, significant restrictions on ZX002, civil penalties or criminal prosecution.

The DEA, and some states, also conduct periodic inspections of registered establishments that handle controlled substances. Facilities
that conduct research, manufacture, store, distribute, import or export controlled substances must be registered to perform these activities and have the security, control and inventory mechanisms required by the DEA to prevent drug loss and
diversion. Failure to

41

maintain compliance, particularly non-compliance resulting in loss or diversion, can result in regulatory action that could have a material adverse effect on our business, results of operations,
financial condition and prospects. The DEA may seek civil penalties, refuse to renew necessary registrations, or initiate proceedings to revoke those registrations. In certain circumstances, violations could lead to criminal proceedings.

Individual states also have controlled substances laws. Though state controlled substances laws often mirror federal law, because the
states are separate jurisdictions, they may separately schedule drugs, as well. While some states automatically schedule a drug when the DEA does so, in other states there has to be rulemaking or a legislative action. State scheduling may delay
commercial sale of any controlled substance drug product for which we obtain federal regulatory approval and adverse scheduling could have a material adverse effect on the commercial attractiveness of such product. We or our partners must also
obtain separate state registrations in order to be able to obtain, handle, and distribute controlled substances for clinical trials or commercial sale, and failure to meet applicable regulatory requirements could lead to enforcement and sanctions
from the states in addition to those from the DEA or otherwise arising under federal law.

The FDA, in consultation with the
DEA, will require us to develop a comprehensive risk management program to reduce the inappropriate use of our product candidate, including restrictions on the manner in which it is marketed and sold, so as to reduce the risk of improper patient
selection and diversion or abuse of the product. Developing such a program in consultation with the FDA may be a time-consuming process and could delay approval of our product candidate. Such a program or delays of any approval from the FDA could
limit market acceptance of the product.

Under the terms of our license agreement with Elan, Elan has the exclusive right to
manufacture and supply both clinical and commercial supplies of ZX002. While Elan is required to comply with applicable laws and regulations regarding controlled substances, we do not have any direct control over Elans compliance in these
regards, and any failure by Elan to comply with those laws and regulations could result in a reduction or cessation of production of ZX002.

Annual DEA quotas on the amount of hydrocodone allowed to be produced in the United States and our specific allocation of hydrocodone by the DEA
could significantly limit the clinical development of ZX002 as well as the production or sale of ZX002 even if we obtain FDA approval.

The DEA limits the availability and production of all Schedule II substances through a quota system which includes a national aggregate quota and individual quotas. Because hydrocodone is
subject to the DEAs production and procurement quota scheme, the DEA establishes annually an aggregate quota for how much hydrocodone may be produced in total in the United States based on the DEAs estimate of the quantity needed
to meet legitimate scientific and medicinal needs. This limited aggregate amount of hydrocodone that the DEA allows to be produced in the United States each year is allocated among individual companies, who must submit applications annually
to the DEA for individual production and procurement quotas. The DEA requires substantial evidence and documentation of expected legitimate medical and scientific needs before assigning quotas to manufacturers. The DEA may adjust aggregate
production quotas and individual production and procurement quotas from time to time during the year, although the DEA has substantial discretion in whether or not to make such adjustments. Elan, which has licensed us the right to sell ZX002 in the
United States, if approved, was allocated a sufficient quantity of hydrocodone to meet our planned clinical and pre-clinical needs during 2010. However, in future years, we may need greater amounts of hydrocodone to sustain and
complete our Phase 3 development program for ZX002 which we commenced in March 2010, and we will need significantly greater amounts of hydrocodone to implement our commercialization plans if the FDA approves ZX002.

Moreover, we do not know what amounts of hydrocodone other companies developing product candidates containing hydrocodone
may request for future years. The DEA, in assessing factors such as medical need, abuse and diversion potential and other policy considerations, may choose to set the

42

aggregate hydrocodone quota lower than the total amount requested by the companies. Elan is permitted to petition the DEA to increase the annual aggregate quota after it is initially
established, but there is no guarantee that the DEA would act favorably upon such a petition. Our procurement quota of hydrocodone may not be sufficient to meet our future clinical development needs or commercial demand if we receive
regulatory approval for ZX002. Any delay or refusal by the DEA in establishing the procurement quota or a reduction in our quota for hydrocodone or a failure to increase it over time as we anticipate could delay or stop the clinical
development of ZX002 or if approved, the product launch or commercial sale of ZX002 or cause us to fail to achieve our expected operating results, which could have a material adverse effect on our business, results of operations, financial condition
and prospects.

We will need to obtain FDA approval of our proposed product trade names and any failure or delay associated with such
approval may adversely impact our business.

Any trade name we intend to use for our products will require approval
from the FDA regardless of whether we have secured a formal trademark registration from the U.S. Patent and Trademark Office, or PTO. The FDA typically conducts a rigorous review of proposed trade names, including an evaluation of potential for
confusion with other trade names. The FDA may also object to a trade name if it believes the name inappropriately implies medical claims. If the FDA objects to our proposed trade names, we may be required to adopt an alternative name for our product
candidate. If we adopt an alternative name, we would lose the benefit of our existing trademark applications and may be required to expend significant additional resources in an effort to identify a suitable trade name that would qualify under
applicable trademark laws, and not infringe the existing rights of third parties and be acceptable to the FDA. We may be unable to build a successful brand identity for a new trademark in a timely manner or at all, which would limit our ability to
generate revenues from our products.

Even though Sumavel DosePro has received regulatory approval in the United States, we, Desitin, or
any other potential partners may never receive approval or commercialize our products outside of the United States.

We
have established an exclusive commercial partnership for Sumavel DosePro with Desitin in the European Union and three other countries in order to seek to accelerate the development and regulatory approvals in those territories. We may also seek to
establish commercial partnerships for Sumavel DosePro in other foreign countries. In order to market Sumavel DosePro or any other products outside of the United States, we, Desitin, or any potential partner must obtain separate regulatory approvals
and comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy and governing, among other things, clinical trials and commercial sales, pricing and distribution of our products. The time required to
obtain approval in other countries might differ from and be longer than that required to obtain FDA approval. The regulatory approval process in other countries may include all of the risks detailed in these Risk Factors and elsewhere in
this prospectus regarding FDA approval in the United States, as well as other risks. For example, legislation analogous to Section 505(b)(2) of the FFDCA in the United States does not exist in other countries. In territories where data is not
freely available, we or our partners may not have the ability to commercialize our products without negotiating rights from third parties to refer to their clinical data in our regulatory applications, which could require the expenditure of
significant additional funds. We, Desitin, or any potential partner may be unable to obtain rights to the necessary clinical data and may be required to develop our own proprietary safety effectiveness dossiers. Desitin submitted a Marketing
Authorization Application for Sumavel DosePro to the Federal Institute for Drugs and Medical Devices (Bundesinstitut für Arzneimittel und Medizinprodukte (BfArM)) in Germany, the reference member state, through the Decentralized Procedure in
October 2009, following completion of a European pivotal bioequivalence trial comparing needle-free Sumavel DosePro to a traditional needle-based autoinjector, Imigran-Inject, the European brand of Imitrex STATdose. However, regulatory approval in
one country does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country may have a negative effect on the regulatory process in others.

43

Failure to obtain
regulatory approval in other countries or any delay or setback in obtaining such approval could have the same adverse effects detailed in these Risk Factors and elsewhere in this prospectus regarding FDA approval in the United States. As
described above, such effects include the risks that our product candidates may not be approved at all or for all requested indications, which could limit the uses of our product candidates and have an adverse effect on their commercial potential or
require costly, post-marketing studies. In addition, we, Desitin, or any potential partner may be subject to fines, suspension or withdrawal of regulatory approvals, product recalls, seizure of products, operating restrictions and criminal
prosecution if we fail to comply with applicable foreign regulatory requirements.

Health care reform measures and changes in policies,
funding, staffing and leadership at the FDA and other agencies could hinder or prevent the commercial success of Sumavel DosePro and any of our product candidates that may be approved by the FDA.

In the United States, there have been a number of legislative and regulatory changes to the healthcare system in ways that could affect
our future results of operations and the future results of operations of our potential customers. For example, the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 established a new Part D prescription drug benefit, which
became effective January 1, 2006. Under the prescription drug benefit, Medicare beneficiaries can obtain prescription drug coverage from private sector plans that are permitted to limit the number of prescription drugs that are covered in each
therapeutic category and class on their formularies. If Sumavel DosePro or any of our product candidates that are approved by the FDA are not widely included on the formularies of these plans, our ability to market our products to the Medicare
population could suffer.

Furthermore, there have been and continue to be a number of initiatives at the federal and state
levels that seek to reduce healthcare costs. Most recently, in March 2010, President Obama signed into law the Patient Protection and Affordable Health Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or
collectively the PPACA, which includes measures to significantly change the way health care is financed by both governmental and private insurers. Among the provisions of the PPACA of greatest importance to the pharmaceutical industry are the
following:



an annual, nondeductible fee on any entity that manufactures or imports certain branded prescription drugs and biologic agents, apportioned among these
entities according to their market share in certain government healthcare programs, beginning in 2011;



an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program, retroactive to January 1, 2010, to
23% and 13% of the average manufacturer price for most branded and generic drugs, respectively;



a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices of
applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturers outpatient drugs to be covered under Medicare Part D, beginning in 2011;

expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to additional individuals
beginning in April 2010 and by adding new mandatory eligibility categories for certain individuals with income at or below 133% of the Federal Poverty Level beginning in 2014, thereby potentially increasing both the volume of sales and
manufacturers Medicaid rebate liability;



expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program, effective in January 2010;



new requirements to report certain financial arrangements with physicians and others, including reporting any transfer of value made or
distributed to prescribers and other healthcare

44

providers and reporting any investment interests held by physicians and their immediate family members during each calendar year beginning in 2012, with reporting starting in 2013;



a new requirement to annually report drug samples that manufacturers and distributors provide to physicians, effective April 1, 2012;



a licensure framework for follow-on biologic products;



a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along
with funding for such research;



creation of the Independent Payment Advisory Board which, beginning in 2014, will have authority to recommend certain changes to the Medicare program
that could result in reduced payments for prescription drugs and those recommendations could have the effect of law even if Congress does not act on the recommendations; and



establishment of a Center for Medicare Innovation at the Centers for Medicare & Medicaid Services to test innovative payment and service
delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending beginning by January 1, 2011.

Many of the details regarding the implementation of the PPACA are yet to be determined, and at this time, it remains unclear the full effect that the PPACA would have on our business.

Additionally, individual states have become increasingly aggressive in passing legislation and implementing regulations designed to
control pharmaceutical product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access, and marketing cost disclosure and transparency measures, and designed to encourage importation from
other countries and bulk purchasing. Legally-mandated price controls on payment amounts by third-party payors or other restrictions could harm our business, results of operations, financial condition and prospects.

In addition, regional healthcare authorities and individual hospitals are increasingly using bidding procedures to determine what
pharmaceutical products and which suppliers will be included in their prescription drug and other healthcare programs. This can reduce demand for our products or put pressure on our product pricing, which could negatively affect our business,
results of operations, financial condition and prospects.

In certain foreign markets, the pricing of prescription drugs is
subject to government control and reimbursement and may, in some cases, be unavailable. In the United States, the commercial success of Sumavel DosePro and our product candidates, if and when commercialized, will depend, in part, upon the
availability of coverage and reimbursement from third-party payors at the federal, state and private levels. Third-party payors include governmental programs such as Medicare or Medicaid, private insurance plans and managed care plans. These
third-party payors may deny coverage or reimbursement for a product or therapy in whole or in part if they determine that the product or therapy was not medically appropriate or necessary. Also, third-party payors have attempted to control costs by
limiting coverage through the use of formularies and other cost-containment mechanisms and the amount of reimbursement for particular procedures or drug treatments.

Additionally, given recent federal and state government initiatives directed at lowering the total cost of healthcare, Congress and state legislatures will likely continue to focus on healthcare reform,
the cost of prescription drugs and the reform of the Medicare and Medicaid programs. While we cannot predict the full outcome of any such legislation, it may result in decreased reimbursement for prescription drugs, which may further exacerbate
industry-wide pressure to reduce prescription drug prices. This could harm our ability to market our products and generate revenues. In addition, legislation has been introduced in Congress that, if enacted, would permit more widespread importation
or re-importation of pharmaceutical products from foreign countries into the United States, including from countries where the products are sold at lower prices than in the United States. Such legislation, or similar regulatory changes, could lead
to a decision to decrease our prices to better

45

compete, which, in turn, could adversely affect our business, results of operations, financial condition and prospects. Alternatively, in response to legislation such as this, we might elect not
to seek approval for or market our products in foreign jurisdictions in order to minimize the risk of re-importation, which could also reduce the revenue we generate from our product sales. It is also possible that other legislative proposals having
similar effects will be adopted.

Furthermore, regulatory authorities assessment of the data and results required to
demonstrate safety and efficacy can change over time and can be affected by many factors, such as the emergence of new information, including on other products, changing policies and agency funding, staffing and leadership. We cannot be sure whether
future changes to the regulatory environment will be favorable or unfavorable to our business prospects. For example, average review times at the FDA for marketing approval applications have fluctuated over the last ten years, and we cannot predict
the review time for any of our submissions with any regulatory authorities. In addition, review times can be affected by a variety of factors, including budget and funding levels and statutory, regulatory and policy changes.

We may incur liability if our continuing medical or health education programs and/or product promotions are determined, or are perceived, to be
inconsistent with regulatory guidelines.

The FDA provides guidelines with respect to appropriate promotion and
continuing medical and health education activities. Although we endeavor to follow these guidelines, the FDA or the Office of the Inspector General: U.S. Department of Health and Human Services may disagree, and we may be subject to significant
liability, including civil and administrative remedies as well as criminal sanctions. In addition, managements attention could be diverted and our reputation could be damaged.

If we fail to comply with federal and state healthcare laws, including fraud and abuse and health information privacy and security laws, we could face substantial penalties and our business, results
of operations, financial condition and prospects could be adversely affected.

As a pharmaceutical company, even though
we do not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payors, certain federal and state healthcare laws and regulations pertaining to fraud and abuse and patients rights are
and will be applicable to our business. We could be subject to healthcare fraud and abuse and patient privacy regulation by both the federal government and the states in which we conduct our business. The laws that may affect our ability to operate
include:



the federal Anti-Kickback Law, which constrains our marketing practices, educational programs, pricing policies, and relationships with healthcare
providers or other entities, by prohibiting, among other things, soliciting, receiving, offering or paying remuneration, directly or indirectly, to induce, or in return for, the purchase or recommendation of an item or service reimbursable under a
federal healthcare program, such as the Medicare and Medicaid programs;



federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from
knowingly presenting, or causing to be presented, claims for payment from Medicare, Medicaid, or other third-party payors that are false or fraudulent, and which may apply to entities like us which provide coding and billing advice to customers;



the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, and its implementing regulations, and the Health Information
Technology for Economic and Clinical Health Act, or HITECH, and its implementing regulations, which prohibit executing a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters and which also
imposes certain requirements relating to the privacy, security and transmission of individually identifiable health information;



federal physician self-referral laws, such as the Stark law, which prohibit a physician from making a referral to a provider of certain health services
with which the physician or the

46

physicians family member has a financial interest, and prohibit submission of a claim for reimbursement pursuant to a prohibited referral; and



state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by
any third-party payor, including commercial insurers, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA,
thus complicating compliance efforts.

Because of the breadth of these laws and the narrowness of the statutory exceptions
and safe harbors available under the U.S. federal Anti-Kickback Statute, it is possible that some of our business activities could be subject to challenge under one or more of such laws. To the extent that any product we make is sold in a foreign
country, we may be subject to similar foreign laws and regulations. If we or our operations are found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we may be subject to penalties,
including civil and criminal penalties, damages, fines, exclusion from participation in U.S. federal or state health care programs, and the curtailment or restructuring of our operations. Any penalties, damages, fines, curtailment or restructuring
of our operations could materially adversely affect our ability to operate our business and our financial results. Although compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, the risks cannot be
entirely eliminated. Any action against us for violation of these laws, even if we successfully defend against it, could cause us to incur significant legal expenses and divert our managements attention from the operation of our business.
Moreover, achieving and sustaining compliance with applicable federal and state privacy, security and fraud laws may prove costly.

Import/export regulations and tariffs may change and increase our costs.

We are subject to risks associated with the regulations relating to the import and export of products and materials. We cannot predict
whether the import and/or export of our products will be adversely affected by changes in, or enactment of, new quotas, duties, taxes or other charges or restrictions imposed by India (where our supplier of the sumatriptan used in Sumavel
DosePro is located), the United Kingdom (where the assembly of Sumavel DosePro takes place) or any other country in the future. Any of these factors could adversely affect our business, results of operations, financial condition and prospects.

Risks Related to Intellectual Property

Our success depends in part on our ability to protect our intellectual property. It is difficult and costly to protect our proprietary rights and technology, and we may not be able to ensure their
protection.

Our commercial success will depend in large part on obtaining and maintaining patent, trademark and trade
secret protection of our product, Sumavel DosePro, and our product candidate, ZX002, their respective components, formulations, methods used to manufacture them and methods of treatment, as well as successfully defending these patents against
third-party challenges. Our ability to stop third parties from making, using, selling, offering to sell or importing Sumavel DosePro or our product candidates is dependent upon the extent to which we have rights under valid and enforceable patents
or trade secrets that cover these activities.

We in-license certain intellectual property for ZX002 from Elan, and we rely on
Elan to file and prosecute patent applications and maintain patents and otherwise protect the licensed intellectual property. We have not had and do not have primary control over these activities or any other intellectual property that may be
related to our in-licensed intellectual property. We cannot be certain that such activities by Elan have been or will be conducted in compliance with applicable laws and regulations or will result in valid and enforceable patents and other
intellectual property rights. Elan has

47

retained the first right, but not the obligation, to initiate an infringement proceeding against a third-party infringer of the intellectual property rights that Elan has licensed to us, and
enforcement of our licensed patents or defense of any claims asserting the invalidity or unenforceability of these patents would also be subject to the control or cooperation of Elan. We are not entitled to control the manner in which Elan may
defend the intellectual property that is licensed to us and it is possible that their defense activities may be less vigorous than had we conducted the defense ourselves.

Most of our patents related to DosePro were acquired from Aradigm, who acquired those patents from a predecessor owner. Our patents related to ZX002 are licensed from Elan. Thus, most of our patents, as
well as many of our pending patent applications, were not written by us or our attorneys, and we did not have control over the drafting and prosecution of these patents. Further, the former patent owners and our licensor might not have given the
same attention to the drafting and prosecution of these patents and applications as we would have if we had been the owners of the patents and applications and had control over the drafting and prosecution. In addition, the former patent owners and
Elan may not have been completely familiar with U.S. patent law, possibly resulting in inadequate disclosure and/or claims. This could possibly result in findings of invalidity or unenforceability of the patents we own and in-license, patents
issuing with reduced claim scope, or in pending applications not issuing as patents.

In addition, as part of the agreement
where we acquired patents related to DosePro from Aradigm, Aradigm retained, and we granted to Aradigm, a non-exclusive, worldwide, royalty free license to the acquired patents solely for purposes of the delivery of one or more aerosolized APIs
directly into the bronchia or lungs. The agreement with Aradigm also includes a covenant not to compete with us regarding technologies or products for the delivery of one or more APIs via needle free injection. That covenant expired on
August 26, 2010, giving Aradigm or its licensees the right to develop and sell other needle-free injection technologies and products.

The patent positions of pharmaceutical, biopharmaceutical and medical device companies can be highly uncertain and involve complex legal and factual questions for which important legal principles remain
unresolved. No consistent policy regarding the breadth of claims allowed in patents in these fields has emerged to date in the United States. There have been recent changes regarding how patent laws are interpreted, and both the PTO and Congress
have recently proposed radical changes to the patent system. We cannot accurately predict future changes in the interpretation of patent laws or changes to patent laws which might be enacted into law. Those changes may materially affect our patents,
our ability to obtain patents and/or the patents and applications of our collaborators and licensors. The patent situation in these fields outside the United States is even more uncertain. Changes in either the patent laws or in interpretations of
patent laws in the United States and other countries may diminish the value of our intellectual property or narrow the scope of our patent protection. Accordingly, we cannot predict the breadth of claims that may be allowed or enforced in the
patents we own or to which we have a license or third-party patents.

The degree of future protection for our proprietary
rights is uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage. For example:



others may be able to make or use compounds that are similar to the pharmaceutical compounds used in Sumavel DosePro and our product candidates but
that are not covered by the claims of our patents;



the APIs in Sumavel DosePro and our current product candidates are, or will soon become, commercially available in generic drug products, and no patent
protection will be available without regard to formulation or method of use;



we or our licensor, as the case may be, may not be able to detect infringement against our in-licensed patents, which may be especially difficult for
manufacturing processes or formulation patents;

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

we or our licensor, as the case may be, might not have been the first to make the inventions covered by our owned or in-licensed issued patents or
pending patent applications;



we or our licensor, as the case may be, might not have been the first to file patent applications for these inventions;



others may independently develop similar or alternative technologies or duplicate any of our technologies;



it is possible that our pending patent applications will not result in issued patents;



it is possible that there are dominating patents to Sumavel DosePro or our product candidates of which we are not aware;



it is possible that there are prior public disclosures that could invalidate our inventions, or our licensors as the case may be, or parts of our
inventions of which we or they are not aware;



it is possible that others may circumvent our owned or in-licensed patents;



it is possible that there are unpublished applications or patent applications maintained in secrecy that may later issue with claims covering our
products or technology similar to ours;



the laws of foreign countries may not protect our or our licensors, as the case may be, proprietary rights to the same extent as the laws of the
Untied States;



the claims of our owned or in-licensed issued patents or patent applications when issued may not cover our device or product candidates;



our owned or in-licensed issued patents may not provide us with any competitive advantages, or may be narrowed in scope, be held invalid or
unenforceable as a result of legal challenges by third parties;



we may not develop additional proprietary technologies for which we can obtain patent protection; or



the patents of others may have an adverse effect on our business.

We also may rely on trade secrets to protect our technology, especially where we do not believe patent protection is appropriate or
obtainable. However, trade secrets are difficult to protect, and we have limited control over the protection of trade secrets used by our licensors, collaborators and suppliers. Although we use reasonable efforts to protect our trade secrets, our
employees, consultants, contractors, outside scientific collaborators and other advisors may unintentionally or willfully disclose our information to competitors. Enforcing a claim that a third party illegally obtained and is using any of our trade
secrets is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets. Moreover, our competitors may independently develop equivalent knowledge,
methods and know-how. If our confidential or proprietary information is divulged to or acquired by third parties, including our competitors, our competitive position in the marketplace will be harmed and our ability to successfully penetrate our
target markets could be severely compromised.

If any of our owned or in-licensed patents are found to be invalid or
unenforceable, or if we are otherwise unable to adequately protect our rights, it could have a material adverse impact on our business and our ability to commercialize or license our technology and products. Likewise, our patents covering certain
technology used in our DosePro device are expected to expire on various dates from 2014 through 2023 and the patents licensed to us by Elan are expected to expire in 2019. Three of our patents, U.S. Patent Nos. 5,891,086, 5,957,886 and 6,135,979,
are expected to expire in 2014, 2016 and 2017, respectively. U.S. Patent No. 5,891,086 covers a particular actuator mechanism forming a part of the needleless injector device; U.S. Patent No. 5,597,886 claims a needleless injector system using a
viscous damping medium; and U.S. Patent No. 6,137,979 covers the needleless injector with particular

49

safety mechanisms. Upon the expiration of these patents, we will lose the right to exclude others from practicing these inventions. Additionally, since these three patents are the only patents
currently listed in the FDA Orange Book for Sumavel DosePro, their expiration will mean that we lose certain advantages that come with Orange Book listing of patents. The expiration of these patents could also have a similar material adverse
effect on our business, results of operations, financial condition and prospects. Moreover, if Elan decides not to commence or continue any action relating to the defense of the patents they have licensed to us, they are required to notify us and we
have the right to initiate proceedings after receiving their notice. Such proceedings will require the assistance of Elan, and we have limited control over the amount or timing of resources Elan devotes on our behalf or the priority they place on
enforcing these patent rights.

If we fail to comply with our obligations in our intellectual property licenses with third parties, we
could lose license rights that are important to our business.

We are a party to a license agreement with Elan,
pursuant to which we license key intellectual property for ZX002. This existing license imposes various diligence, milestone payment, royalty, insurance and other obligations on us. If we fail to comply with these obligations, Elan may have the
right to terminate the license, in which event we would not be able to develop or market ZX002. If we lose such license rights, our business, results of operations, financial condition and prospects may be materially adversely affected. We may enter
into additional licenses in the future and if we fail to comply with obligations under those agreements, we could suffer similar consequences.

We may incur substantial costs as a result of litigation or other proceedings relating to patent and other intellectual property rights, and we may
be unable to protect our rights to our products and technology.

If we or our collaborators or licensors choose to go
to court to stop a third party from using the inventions claimed in our owned or in-licensed patents, that third party may ask the court to rule that the patents are invalid and/or should not be enforced against that third party. These lawsuits are
expensive and would consume time and other resources even if we or they, as the case may be, were successful in stopping the infringement of these patents. In addition, there is a risk that the court will decide that these patents are not valid and
that we or they, as the case may be, do not have the right to stop others from using the inventions.

There is also the risk
that, even if the validity of these patents is upheld, the court will refuse to stop the third party on the ground that such third-partys activities do not infringe our owned or in-licensed patents. In addition, the U.S. Supreme Court has
recently changed some tests regarding granting patents and assessing the validity of patents. As a consequence, issued patents may be found to contain invalid claims according to the newly revised standards. Some of our own or in-licensed patents
may be subject to challenge and subsequent invalidation or significant narrowing of claim scope in a reexamination proceeding before the PTO, or during litigation, under the revised criteria which make it more difficult to obtain patents.

We may also not be able to detect infringement of our own or in-licensed patents, which may be especially difficult for
methods of manufacturing or formulation products. While we intend to take actions reasonably necessary to enforce our patent rights, we depend, in part, on our licensors and collaborators to protect a substantial portion of our proprietary rights.
For example, Elan, our licensor, is primarily responsible for the enforcement of the intellectual property rights related to ZX002. Under the agreement, Elan has the first right, but not the obligation, to initiate an infringement proceeding against
a third-party infringer. If Elan decides not to commence or continue any action, they are required to notify us and grant us step in rights to enforce the in-licensed intellectual property. Such enforcement will require the cooperation of Elan, and
we will be responsible for Elans reasonable expenses and attorneys fees incurred as a result of that cooperation. We have limited control over the amount or timing of resources Elan devotes on our behalf or the priority they place on
enforcing these patent rights to our advantage.

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If we are sued for infringing
intellectual property rights of third parties, it will be costly and time consuming, and an unfavorable outcome in that litigation would have a material adverse effect on our business.

Our commercial success depends upon our ability and the ability of our collaborators to develop, manufacture, market and sell our device
and product candidates and use our proprietary technologies without infringing the proprietary rights of third parties. Numerous U.S. and foreign issued patents and pending patent applications, which are owned by third parties, exist in the fields
relating to Sumavel DosePro and our product candidates. As the medical device, biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that others may assert our product or product candidates infringe the
patent rights of others. Moreover, it is not always clear to industry participants, including us, which patents cover various types of medical devices, drugs, products or their methods of use. Thus, because of the large number of patents issued and
patent applications filed in our fields, there may be a risk that third parties may allege they have patent rights encompassing our product, product candidates, technology or methods.

In addition, there may be issued patents of third parties of which we are currently unaware, that are infringed or are alleged to be
infringed by our product, product candidates or proprietary technologies. Because some patent applications in the United States may be maintained in secrecy until the patents are issued, because patent applications in the United States and many
foreign jurisdictions are typically not published until eighteen months after filing, and because publications in the scientific literature often lag behind actual discoveries, we cannot be certain that others have not filed patent applications for
technology covered by our owned and in-licensed issued patents or our pending applications, or that we or, if applicable, a licensor were the first to invent the technology. Our competitors may have filed, and may in the future file, patent
applications covering our products or technology similar to ours. Any such patent application may have priority over our owned and in-licensed patent applications or patents, which could further require us to obtain rights to issued patents covering
such technologies. If another party has filed a U.S. patent application on inventions similar to those owned or in-licensed to us, we or, in the case of in-licensed technology, the licensor may have to participate in an interference proceeding
declared by the PTO to determine priority of invention in the United States. If another party has reason to assert a substantial new question of patentability against any of our claims in our owned and in-licensed U.S. patents, the third party can
request that the PTO reexamine the patent claims, which may result in a loss of scope of some claims or a loss of the entire patent. In addition to potential infringement claims, interference and reexamination proceedings, we may become a party to
patent opposition proceedings in the European Patent Office where either our patents are challenged, or we are challenging the patents of others. The costs of these proceedings could be substantial, and it is possible that such efforts would be
unsuccessful if the other party had independently arrived at the same or similar invention prior to our own or, if applicable, our licensors invention, resulting in a loss of our U.S. patent position with respect to such inventions.

We may be exposed to, or threatened with, future litigation by third parties having patent or other intellectual property
rights alleging that our device and/or product candidates and/or proprietary technologies infringe their intellectual property rights. These lawsuits are costly and could adversely affect our results of operations and divert the attention of
managerial and technical personnel. There is a risk that a court would decide that we or our commercialization partners are infringing the third partys patents and would order us or our partners to stop the activities covered by the patents.
In addition, there is a risk that a court will order us or our partners to pay the other party damages for having violated the other partys patents.

If a third-partys patents was found to cover our device and/or product candidates, proprietary technologies or their uses, we or our collaborators could be enjoined by a court and required to pay
damages and could be unable to commercialize Sumavel DosePro or our product candidates or use our proprietary technologies unless we or they obtained a license to the patent. A license may not be available to us or our collaborators on acceptable
terms, if at all. In addition, during litigation, the patent

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holder could obtain a preliminary injunction or other equitable relief which could prohibit us from making, using or selling our products, technologies or methods pending a trial on the merits,
which could be years away.

There is a substantial amount of litigation involving patent and other intellectual property rights
in the device, biotechnology and pharmaceutical industries generally. If a third party claims that we or our collaborators infringe its intellectual property rights, we may face a number of issues, including, but not limited to:



infringement and other intellectual property claims which, regardless of merit, may be expensive and time-consuming to litigate and may divert our
managements attention from our core business;



substantial damages for infringement, which we may have to pay if a court decides that the product at issue infringes on or violates the third
partys rights, and if the court finds that the infringement was willful, we could be ordered to pay treble damages and the patent owners attorneys fees;



a court prohibiting us from selling or licensing the product unless the third party licenses its product rights to us, which it is not required to do;



if a license is available from a third party, we may have to pay substantial royalties, upfront fees and/or grant cross-licenses to intellectual
property rights for our products; and



redesigning our products or processes so they do not infringe, which may not be possible or may require substantial monetary expenditures and time.

Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because
they have substantially greater resources. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ability to raise the funds necessary to continue our operations or
otherwise have a material adverse effect on our business, results of operations, financial condition and prospects.

Although we own
worldwide rights to Sumavel DosePro, we do not have patent protection for the product in a significant number of countries, and we will be unable to prevent infringement in those countries.

Our patent portfolio related to DosePro includes patents in the United States, Canada, Germany, Spain, France, the United Kingdom, Italy,
and Japan. The covered technology and the scope of coverage varies from country to country. For those countries where we do not have granted patents, we have no ability to prevent the unauthorized use of our intellectual property, and third parties
in those countries may be able to make, use, or sell products identical to, or substantially similar to DosePro.

Obtaining and
maintaining our patent protection depends on compliance with various procedural, document submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for
non-compliance with these requirements.

Periodic maintenance fees on our owned and in-licensed patents are due to be
paid to the PTO in several stages over the lifetime of the patents. Future maintenance fees will also need to be paid on other patents which may be issued to us. We have systems in place to remind us to pay these fees, and we employ outside firms to
remind us or our in-licensor to pay annuity fees due to foreign patent agencies on our pending foreign patent applications. The PTO and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee
payment and other similar provisions during the patent application process. In many cases, an inadvertent lapse can be cured by payment of a late fee or by other means in accordance with the applicable rules. However, there are

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situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In
such an event, our competitors might be able to enter the market and this circumstance would have a material adverse effect on our business.

For the patents and patent applications related to ZX002, Elan is obligated to maintain our in-licensed patents in the United States under our license agreement. Should Elan fail to pursue maintenance of
our licensed patents and patent applications, Elan is obligated to notify us and, at that time, we will be granted an opportunity to maintain the prosecution and avoid withdrawal, cancellation, expiration or abandonment of the licensed U.S. patents
and applications.

We also may rely on trade secrets and confidentiality agreements to protect our technology and know-how,
especially where we do not believe patent protection is appropriate or obtainable. However, trade secrets are difficult to protect, and we have limited control over the protection of trade secrets used by our licensors, collaborators and suppliers.
Although we use reasonable efforts to protect our trade secrets, our employees, consultants, contractors, outside scientific collaborators and other advisors may unintentionally or willfully disclose our information to competitors. Enforcing a claim
that a third party illegally obtained and is using any of our trade secrets is expensive and time consuming, and the outcome is unpredictable. In addition, courts outside the United States are sometimes less willing to protect trade secrets.
Moreover, our competitors may independently develop equivalent knowledge, methods and know-how. If our confidential or proprietary information is divulged to or acquired by third parties, including our competitors, our competitive position in the
marketplace will be harmed and our ability to successfully generate revenues from Sumavel DosePro and, if approved by the FDA or other regulatory authorities, our product candidates could be adversely affected.

We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.

As is common in the device, biotechnology and pharmaceutical industries, we employ individuals who were previously
employed at other device, biotechnology or pharmaceutical companies, including our competitors or potential competitors. Although no claims against us are currently pending, we may be subject to claims that these employees or we have inadvertently
or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result
in substantial costs and be a distraction to management, which would adversely affect our financial condition.

Risks
Relating to this Offering and an Investment in Our Stock

We expect that the price of our common stock will fluctuate substantially.

The initial public offering price for the shares of our common stock sold in this offering has been determined by
negotiation between the representatives of the underwriters and us. This price may not reflect the market price of our common stock following this offering. The price of our common stock may decline, perhaps substantially. In addition, following
this offering the market price of our common stock is likely to be highly volatile and may fluctuate substantially due to many factors, including those described elsewhere in this Risk Factors section in this prospectus and the
following:

the development status of ZX002 or any of our other product candidates, including the results from our clinical trials;



FDA or international regulatory actions, including whether and when we receive regulatory approval, for any of our product candidates;

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

other regulatory developments, including the FDAs potential grant of regulatory exclusivity to a competitor who receives FDA approval before us
for an extended-release hydrocodone product, which could significantly delay our ability to receive approval for ZX002;



announcements of the introduction of new products by us or our competitors;

announcements relating to litigation, intellectual property or our business, and the publics response to press releases or other public
announcements by us or third parties;



variations in the level of expenses related to ZX002 or any of our other product candidates or clinical development programs, including relating to the
timing of invoices from, and other billing practices of, our CROs and clinical trial sites;



market conditions or trends in the pharmaceutical sector or the economy as a whole;



changes in operating performance and stock market valuations of other pharmaceutical companies and price and volume fluctuations in the overall stock
market;



litigation or public concern about the safety of Sumavel DosePro or our product candidates;

the development and sustainability of an active trading market for our common stock;



future sales of our common stock by our officers, directors and significant stockholders;



other events or factors, including those resulting from war, incidents of terrorism, natural disasters or responses to these events;



changes in accounting principles; and



discussion of us or our stock price by the financial and scientific press and in online investor communities.

In addition, the stock markets, and in particular the Nasdaq Global Market, have experienced extreme price and volume fluctuations that
have affected and continue to affect the market prices of equity securities of many pharmaceutical companies. Stock prices of many pharmaceutical companies have fluctuated in a manner unrelated or disproportionate to the operating performance of
those companies. The realization of any of the above risks or any of a broad range of other risks, including those or any of a broad range of other risks, including those described in these Risk Factors, could have a dramatic and
material adverse impact on the market price of our common stock.

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There may not be a viable public
market for our common stock.

Prior to this offering, there has been no public market for our common stock, and there
can be no assurance that a regular trading market will develop and continue after this offering or that the market price of our common stock will not decline, perhaps substantially, below the initial public offering price. The initial public
offering price has been determined through negotiations between us and the representatives of the underwriters and may not be indicative of the market price of our common stock following this offering. Among the factors considered in such
negotiations were prevailing market conditions; our results of operations and financial condition; financial and operating information and market valuations with respect to other companies that we and the representatives of the underwriters believe
to be comparable or similar to us; the present state of our development; and our future prospects. See Underwriting for additional information. If you purchase shares of our common stock, you may not be able to resell those shares at or
above the initial public offering price. We cannot predict the extent to which investor interest in our company will lead to the development of an active trading market on the Nasdaq Global Market or otherwise or how liquid that market might become.
An active public market for our common stock may not develop or be sustained after the offering. If an active public market does not develop or is not sustained, it may be difficult for you to sell your shares of common stock at a price that is
attractive to you, or at all. Further, an inactive market may also impair our ability to raise capital by selling shares of our common stock and may impair our ability to enter into strategic partnerships or acquire companies or products, product
candidates or technologies by using our shares of common stock as consideration.

If you purchase shares of our common stock sold in
this offering, you will experience immediate and substantial dilution in the net tangible book value of your shares.

The initial public offering price of our common stock in this offering is considerably more than the net tangible book value (deficit) per
share of our outstanding common stock. Investors purchasing shares of common stock in this offering will pay a price that substantially exceeds the value of our tangible assets after subtracting liabilities. As a result, investors will:



incur immediate dilution of $10.14 per share, based on an assumed initial public offering price of $13.00 per share, the mid-point of the price range
set forth on the cover page of this preliminary prospectus; and



contribute 32.0% of the total amount invested to date to fund our company based on an assumed initial offering price to the public of $13.00 per share,
the mid-point of the price range set forth on the cover page of this preliminary prospectus, but will own only 26.0% of the shares of common stock outstanding after the offering.

For additional information on how the foregoing amounts were calculated, see Dilution. To the extent outstanding stock options or warrants are
exercised, there will be further dilution to new investors.

Because we may need to raise additional capital to fund our
commercialization efforts and clinical development programs, among other things, we may in the future sell substantial amounts of common stock or securities convertible into or exchangeable for common stock. These future issuances of common stock or
common stock-related securities, together with the exercise of outstanding options and warrants and any additional shares issued in connection with acquisitions, if any, may result in further dilution to investors. See the Dilution
section in this prospectus.

We may invest or spend the proceeds of this offering in ways with which you may not agree or in ways which
may not yield a significant return.

Our management will have considerable discretion in the application of the net
proceeds of this offering, and you will not have the opportunity, as part of your investment decision, to assess whether the proceeds are being used appropriately. The net proceeds may be used for purposes that do not increase our operating results
or market value. Until the net proceeds are used, they may be placed in

55

investments that do not produce significant income or that may lose value. The failure of our management to apply these funds effectively could result in unfavorable returns and uncertainty about
our prospects, each of which could cause the price of our common stock to decline.

Our quarterly operating results may fluctuate
significantly.

Our quarterly operating results are difficult to predict and may fluctuate significantly from period to
period, particularly because the commercial success of, and demand for, Sumavel DosePro, as well as the success and costs of our ZX002 and other product candidate development programs are uncertain and therefore our future prospects are uncertain.
Our net loss and other operating results will be affected by numerous factors, including:



fluctuations in the quarterly revenues of Sumavel DosePro, including based on our distributors inventory management practices and buying patterns
and the performance by Astellas;



the level of underlying demand for Sumavel DosePro or any of our other product candidates that may receive regulatory approval;



variations in the level of development expenses related to ZX002 or other development programs;



results of clinical trials for ZX002;



any intellectual property infringement lawsuit in which we may become involved;



regulatory developments and legislative changes, including healthcare reform, affecting our product and product candidates or those of our competitors;
and



our execution of any collaborative, licensing or similar arrangements, and the timing of payments we may make or receive under these arrangements.

If our quarterly operating results fall below the expectations of investors or securities analysts, the
price of our common stock could decline substantially. Furthermore, any quarterly fluctuations in our operating results may, in turn, cause the price of our stock to fluctuate substantially.

We may become involved in securities class action litigation that could divert managements attention and adversely affect our business and could subject us to significant liabilities.

The stock markets have from time to time experienced significant price and volume fluctuations that have affected the
market prices for the common stock of pharmaceutical companies. These broad market fluctuations as well a broad range of other factors, including the realization of any of the risks described in these Risk Factors, may cause the market
price of our common stock to decline. In the past, securities class action litigation has often been brought against a company following a decline in the market price of its securities. This risk is especially relevant for us because biotechnology
and pharmaceutical companies generally experience significant stock price volatility. We may become involved in this type of litigation in the future. Litigation often is expensive and diverts managements attention and resources, which could
adversely affect our business. Any adverse determination in any such litigation or any amounts paid to settle any such actual or threatened litigation could require that we make significant payments.

If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our stock price and
trading volume could decline.

The trading market for our common stock will depend in part on the research and reports
that securities or industry analysts publish about us or our business. We do not currently have and may never obtain research coverage by securities and industry analysts. If no securities or industry analysts commence coverage of our company, the
trading price for our stock would be negatively impacted. If we obtain securities or industry analyst coverage and if one or more of the analysts who covers us

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downgrades our stock, publishes inaccurate or unfavorable research about our business, our stock price would likely decline. If one or more of these analysts ceases coverage of us or fails to
publish reports on us regularly, demand for our stock could decrease, which could cause our stock price and trading volume to decline.

Our executive officers, key employees and directors and their affiliates will exercise significant control over stockholder voting matters in a
manner that may not be in the best interests of all of our stockholders.

Immediately following this offering, our
executive officers, key employees and directors and their affiliates will together control approximately 63.6% of our outstanding common stock, assuming no exercise of the underwriters over-allotment option shares and no exercise of
outstanding options or warrants. Six of our non-employee directors are, or are representatives designated by, significant stockholders and two of our directors are executive officers. As a result, these stockholders will collectively be able to
significantly influence and may be able to control all matters requiring approval of our stockholders, including the election of directors and approval of significant corporate transactions such as mergers, consolidations or the sale of all or
substantially all of our assets. The concentration of ownership may delay, prevent or deter a change in control of our company even when such a change may be in the best interests of some stockholders, impede a merger, consolidation, takeover or
other business combination involving us, or could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale of our company or our assets and might adversely affect the prevailing market price of our
common stock.

In addition, sales of shares beneficially owned by executive officers and directors and their affiliates
could be viewed negatively by third parties and have a negative impact on our stock price. Moreover, we cannot assure you as to how these shares will may be distributed and subsequently voted.

Future sales of our common stock or securities convertible or exchangeable for our common stock may depress our stock price.

If our existing stockholders or holders of our currently outstanding convertible notes, options or warrants sell, or indicate an
intention to sell, substantial amounts of our common stock in the public market after the lock-up and other legal restrictions on resale discussed in this prospectus lapse, the trading price of our common stock could decline. The perception in the
market that these sales may occur could also cause the trading price of our common stock to decline. Based on shares of common stock outstanding as of September 30, 2010, upon completion of this offering we will have outstanding a total of
23,079,384 shares of common stock, assuming no exercise of the underwriters overallotment option and (based on the assumptions set forth under Prospectus SummaryThe Offering) the issuance of a total of 15,629,135 shares of
our common stock upon the expected exercise of the Series B Warrants and the conversion of our outstanding convertible preferred stock and 2010 Notes in connection with the closing of this offering. As discussed under Prospectus
SummaryThe Offering the actual number of shares issued upon exercise of the Series B Warrants and conversion of the 2010 Notes will likely differ from the number of shares reflected in the total number of shares set forth in the
preceding sentence. Of these shares, only the shares of common stock sold by us in this offering, plus any shares sold upon exercise of the underwriters overallotment option will be freely tradable, without restriction, in the public market
immediately following this offering. Our underwriters may, however, in their sole discretion, permit our officers, directors and other stockholders and the holders of our outstanding options and warrants who are subject to these lock-up agreements
to sell shares prior to the expiration of the lock-up agreements.

We expect that the lock-up agreements pertaining to this
offering will expire 180 days from the date of this prospectus (subject to extension upon the occurrence of specified events). After the lock-up agreements expire, up to an additional 17,079,384 shares of common stock, and up to approximately
256,816 shares of common stock issuable upon exercise of our outstanding warrants, will be eligible for

57

sale in the public market, subject to volume limitations under Rule 144 under the Securities Act of 1933, as amended, or the Securities Act, with respect to shares held by directors, executive
officers and other affiliates. In addition, shares of common stock that are either subject to outstanding options or reserved for future issuance under our employee benefit plans will become eligible for sale in the public market to the extent
permitted by the provisions of various vesting schedules, the lock-up agreements and Rule 144 and Rule 701 under the Securities Act and, in any event, we plan to file a registration statement permitting shares of common stock issued on exercise of
options to be freely sold in the public market. If these additional shares of common stock are sold, or if it is perceived that they will be sold, in the public market, the trading price of our common stock could decline.

Certain holders of shares of our common stock, warrants to purchase our capital stock and the shares of common stock issuable upon
exercise of those warrants are entitled to rights with respect to the registration of their shares under the Securities Act, subject to the 180-day lock-up agreements described above. Registration of these shares under the Securities Act would
result in the shares becoming freely tradable without restriction under the Securities Act, except for shares purchased by affiliates. In addition, after the lock-up agreements described above expire, our directors may and we expect that our
executive officers will establish programmed selling plans under Rule 10b5-1 of the Securities Exchange Act of 1934, as amended, or the Exchange Act, for the purpose of effecting sales of our common stock. Any sales of securities by these
stockholders, or the perception that those sales may occur, including the entry into such programmed selling plans, could have a material adverse effect on the trading price of our common stock.

Anti-takeover provisions under our charter documents and Delaware law could delay or prevent a change of control which could limit the market price
of our common stock and may prevent or frustrate attempts by our stockholders to replace or remove our current management.

Our amended and restated certificate of incorporation and amended and restated bylaws, which are to become effective at or prior to the closing of this offering, contain provisions that could delay or
prevent a change of control of our company or changes in our board of directors that our stockholders might consider favorable. Some of these provisions include:



a board of directors divided into three classes serving staggered three-year terms, such that not all members of the board will be elected at one time;



a prohibition on stockholder action through written consent, which requires that all stockholder actions be taken at a meeting of our stockholders;



a requirement that special meetings of stockholders be called only by the chairman of the board of directors, the chief executive officer, the
president or by a majority of the total number of authorized directors;



advance notice requirements for stockholder proposals and nominations for election to our board of directors;



a requirement that no member of our board of directors may be removed from office by our stockholders except for cause and, in addition to any other
vote required by law, upon the approval of not less than
662/3% of all outstanding shares of our voting stock then entitled to vote in
the election of directors;



a requirement of approval of not less than 662/3% of all outstanding shares of our voting stock to amend any bylaws by stockholder action or to amend specific provisions
of our certificate of incorporation; and



the authority of the board of directors to issue preferred stock on terms determined by the board of directors without stockholder approval and which
preferred stock may include rights superior to the rights of the holders of common stock.

58

In addition, because we
are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporate Law, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These
anti-takeover provisions and other provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make it more difficult for stockholders or potential acquirors to obtain control of our board of directors
or initiate actions that are opposed by the then-current board of directors and could also delay or impede a merger, tender offer or proxy contest involving our company. These provisions could also discourage proxy contests and make it more
difficult for you and other stockholders to elect directors of your choosing or cause us to take other corporate actions you desire. Any delay or prevention of a change of control transaction or changes in our board of directors could cause the
market price of our common stock to decline.

We have never paid dividends on our capital stock, and we do not anticipate paying any
cash dividends in the foreseeable future.

The continued operation and expansion of our business will require
substantial funding. Investors seeking cash dividends in the foreseeable future should not purchase our common stock. We have paid no cash dividends on any of our classes of capital stock to date and we currently intend to retain our available cash
to fund the development and growth of our business. Any determination to pay dividends in the future will be at the discretion of our board of directors and will depend upon results of operations, financial condition, contractual restrictions,
restrictions imposed by applicable law and other factors our board of directors deems relevant. In addition, our ability to pay cash dividends is currently prohibited by the terms of our loan and security agreements. We do not anticipate paying any
cash dividends on our common stock in the foreseeable future. Accordingly, if you purchase shares in this offering, realization of a gain on your investment will depend on the appreciation of the price of our common stock, which may never occur.

We will incur significant increased costs as a result of operating as a public company, and our management will be required to devote
substantial time to meet compliance obligations.

As a public company, we will incur significant legal, accounting and
other expenses that we did not incur as a private company. We will be subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and the
Nasdaq Stock Market, or Nasdaq, that impose significant requirements on public companies, including requiring establishment and maintenance of effective disclosure and financial controls and changes in corporate governance practices. The Exchange
Act will require, among other things, that we file annual, quarterly and current reports with respect to our business and financial condition. In addition, on July 21, 2010, the Dodd-Frank Wall Street Reform and Protection Act, or the
Dodd-Frank Act, was enacted. There are significant corporate governance and executive compensation-related provisions in the Dodd-Frank Act that require the SEC to adopt additional rules and regulations in these areas such as say on pay
and proxy access. The requirements of these rules and regulations will increase our legal and financial compliance costs, make some activities more difficult, time-consuming or costly and may also place undue strain on our personnel, systems and
resources. Our management and other personnel will need to devote a substantial amount of time to these new compliance initiatives. In addition, we expect these rules and regulations to make it more difficult and more expensive for us to obtain
director and officer liability insurance, and we may be required to accept reduced policy limits and coverage or incur substantially higher costs to obtain the same or similar coverage. As a result, it may be more difficult for us to attract and
retain qualified people to serve on our board of directors, our board committees or as executive officers.

The Sarbanes-Oxley
Act requires, among other things, that we maintain effective internal controls for financial reporting and disclosure controls and procedures. Ensuring that we have adequate internal financial and accounting controls and procedures in place is a
costly and time-consuming effort that needs to be re-evaluated frequently. In particular, commencing in fiscal 2011, we must perform system

59

and process evaluation and testing of our internal controls over financial reporting to allow management and our independent registered public accounting firm to report on the effectiveness of
our internal controls over financial reporting, as required by Section 404 of the Sarbanes-Oxley Act, or Section 404. Although we may qualify for an exemption from the requirements of Section 404 as a result of provisions in the
Dodd-Frank Act, we currently do not intend to take advantage of the exception even if it is available to us. Our testing, or the subsequent testing by our independent registered public accounting firm, may reveal deficiencies in our internal
controls over financial reporting that are deemed to be material weaknesses or that may require prospective or retroactive changes to our financial statements or identify other areas for further attention or improvement. We expect to incur
significant expense and devote substantial management effort toward ensuring compliance with Section 404. We currently do not have an internal audit function, and we may need to hire additional accounting and financial staff with appropriate
public company experience and technical accounting knowledge. Implementing any appropriate changes to our internal controls may require specific compliance training for our directors, officers and employees, entail substantial costs to modify our
existing accounting systems, and take a significant period of time to complete. Such changes may not, however, be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to
produce accurate financial statements or other reports on a timely basis, could increase our operating costs and could materially impair our ability to operate our business. Moreover, effective internal controls are necessary for us to produce
reliable financial reports and are important to help prevent fraud. If we are not able to comply with the requirements of Section 404 in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in
our internal controls that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by Nasdaq, the SEC or other regulatory authorities, which would entail expenditure of
additional financial and management resources.

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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS AND MARKET DATA

This prospectus contains forward-looking statements that involve substantial risks and uncertainties, including statements regarding the
future sales potential for Sumavel DosePro, the progress and timing of clinical trials, the safety and efficacy of our product candidates, the goals of our development activities, estimates of the potential markets for our product candidates,
estimates of the capacity of manufacturing and other facilities to support our products, projected cash needs and our expected future revenues, operations and expenditures. The forward-looking statements are contained principally in the sections
entitled Prospectus Summary, Risk Factors, Managements Discussion and Analysis of Financial Condition and Results of Operations and Business. In some cases, you can identify forward-looking
statements by the following words: may, will, could, would, should, expect, intend, plan, anticipate, believe,
estimate, predict, project, potential, continue, ongoing or the negative of these terms or other comparable terminology, although not all forward-looking statements contain
these words. These statements relate to future events or our future financial performance or condition and involve known and unknown risks, uncertainties and other factors that could cause our actual results, levels of activity, performance or
achievement to differ materially from those expressed or implied by these forward-looking statements. These risk and uncertainties, include, among others discussed in the Risk Factors section of this prospectus:

our short operating history, our early stage of commercialization, our lack of significant revenue, our history of significant net losses and negative
cash flow from operations and our ability to obtain additional funding to continue to operate our business, which funding may not be available on commercially reasonable terms, or at all;

our recurring losses from operations, which raise substantial doubt about our ability to continue as a going concern;



our reliance on a limited number of wholesale pharmaceutical distributors, of which the largest three collectively accounted for 95.6% of our total
gross sales of Sumavel DosePro for the nine months ended September 30, 2010;



our ability to successfully complete Phase 3 clinical development of ZX002 or any of our other product candidates on expected timetables, or at all,
which includes enrolling sufficient patients in our clinical trials and demonstrating the safety and efficacy of these product candidates in such trials;



the risk that one of our competitors will receive FDA approval for an extended-release hydrocodone product for the same condition of use as
ZX002 before we receive FDA approval for ZX002, which could significantly delay our ability to commercialize ZX002;



the content and timing of submissions to, and decisions made by, the FDA and other regulatory agencies, including foreign regulatory agencies, and
demonstrating the safety and efficacy of ZX002 or any other product candidates to the satisfaction of the FDA and such other agencies;



our ability to maintain regulatory approval for Sumavel DosePro;



the scope and validity of patent protection for Sumavel DosePro, ZX002 and our other product candidates and our ability to commercialize Sumavel
DosePro, ZX002 and our other product candidates without infringing the patent rights of others;

61



adverse side effects or inadequate therapeutic efficacy of Sumavel DosePro that could result in product recalls, market withdrawals or product
liability claims;



the intense competition in the pharmaceutical industry and the ability of our competitors, many of whom have greater resources than we do, to offer
different or better therapeutic alternatives than our products;



our ability to obtain and maintain adequate levels of coverage and reimbursement for Sumavel DosePro or any of our other product candidates that may be
approved for sale from the government or other third-party payors, and the extent of such coverage and reimbursement, and the willingness of third-party payors to pay for our products versus less expensive therapies;



our reliance on third-party single source manufacturers and suppliers for the manufacture and supply of our product and product candidates;



our ability to grow our business by identifying and acquiring or in-licensing new product candidates or approved products, increasing the size of our
organization and attracting and retaining key personnel;



our compliance with our agreements with Astellas, Elan and Desitin and the right of the other parties to terminate those agreements under specified
circumstances or, in some cases, at will; and



the impact of healthcare reform legislation.

You should read this prospectus and the documents that we reference in this prospectus and have filed as exhibits to the registration statement, of which this prospectus is a part, completely and with the
understanding that our actual results may differ materially from what we expect and from those expressed or implied by our forward-looking statements. In light of the significant uncertainties in our forward-looking statements, you should not place
undue reliance on or regard these statements as a representation or warranty by us or any other person that we will achieve our objectives and plans in any specified timeframe, or at all. These forward-looking statements represent our estimates and
assumptions only as of the date of this prospectus regardless of the time of delivery of this prospectus or any sale of our common stock and, except as required by law, we undertake no obligation to update or revise publicly any forward-looking
statements, whether as a result of new information, future events or otherwise after the date of this prospectus. The forward-looking statements contained in this prospectus are excluded from the safe harbor protection provided by the Private
Securities Litigation Reform Act of 1995 and Section 27A of the Securities Act of 1933, as amended.

This prospectus also contains estimates, projections and other information concerning our industry, our business, and
the markets for Sumavel DosePro, ZX002 and other drugs, including data regarding the estimated size of those markets, their projected growth rates, the incidence of certain medical conditions, statements that certain drugs, classes of drugs or
dosages are the most widely prescribed in the United States or other markets, the perceptions and preferences of patients and physicians regarding certain therapies and other prescription, prescriber and patient data, as well as data regarding
market research, estimates and forecasts prepared by our management. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances
may differ materially from events and circumstances reflected in this information. Unless otherwise expressly stated, we obtained this industry, business, market and other data from reports, research surveys, studies and similar data prepared by
market research firms and other third parties, industry, medical and general publications, government data and similar sources. In particular, unless otherwise specified, all prescription, prescriber and patient data in this prospectus is from
Wolters Kluwer Pharma Solutions, Source® Pharmaceutical Audit Suite (PHAST) Institution/Retail, Source® PHAST Retail, Source® Prescriber, Source®
LaunchTrac, Source® Dynamic Claims or Source® Lx PTA. In some cases, we do not expressly refer to the sources from which this data is derived. In that regard, when we refer to one or more sources of this type of
data in any paragraph, you should assume that other data of this type appearing in the same paragraph is derived from the same sources, unless otherwise expressly stated or the context otherwise requires.

62

USE OF PROCEEDS

We estimate that we will receive net proceeds of approximately $70.4 million (or approximately $81.3 million if the underwriters over-allotment option is exercised in full) from the sale of the
shares of common stock offered by us in this offering, based on an assumed initial public offering price of $13.00 per share (the mid-point of the price range set forth on the cover page of this preliminary prospectus) and after deducting the
estimated underwriting discounts and commissions and estimated offering costs payable by us. Each $1.00 increase or decrease in the assumed initial public offering price of $13.00 per share (the mid-point of the price range set forth on the cover
page of this preliminary prospectus) would increase or decrease, respectively, the net proceeds to us from this offering by approximately $5.6 million, assuming the number of shares offered by us, as set forth on the cover page of this preliminary
prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering costs payable by us.

The principal purposes of this offering are to obtain additional capital to support our operations, to create a public market for our common stock and to facilitate our future access to the public equity
markets. We intend to use approximately $35.0 million of the net proceeds from this offering to fund Phase 3 clinical trials and related development activities for ZX002 and approximately $35.4 million to fund the ongoing commercialization of
Sumavel DosePro and for working capital and other general corporate purposes. Although it is difficult to predict future liquidity requirements, we believe that the net proceeds from this offering, together with our existing cash and cash
equivalents, future product revenues and borrowings available under our $10.0 million revolving credit facility will be sufficient to fund our operations for at least the next 12 months. In particular, we believe the portion of the net proceeds from
this offering intended to fund Phase 3 clinical trials and related development activities for ZX002, together with our existing cash and cash equivalents, future product revenues and borrowings available under our $10.0 million revolving credit
facility, will enable us to complete the development of ZX002 through our planned submission of an NDA with the FDA, although we cannot assure you that this will occur. We may also use a portion of the net proceeds to in-license, acquire or invest
in complementary businesses or products; however, we have no current commitments or obligations to do so.

The amounts and
timing of our actual expenditures will depend on numerous factors, including the commercial success of Sumavel DosePro and the progress of our clinical trials and other development and commercialization efforts, as well as the amount of cash used in
our operations. We therefore cannot estimate the amount of net proceeds to be used for the purposes described above. We may find it necessary or advisable to use the net proceeds for other purposes, and we will have broad discretion in the
application of the net proceeds. Pending the uses described above, we plan to invest the net proceeds from this offering in short- and intermediate-term, interest-bearing obligations, investment-grade instruments, certificates of deposit or direct
or guaranteed obligations of the U.S. government.

DIVIDEND POLICY

We have never declared or paid any cash dividends on our capital stock and do not anticipate paying any cash dividends in the foreseeable
future. We expect to retain available cash to finance ongoing operations and the potential growth of our business. Any future determination to pay dividends on our common stock will be at the discretion of our board of directors and will depend
upon, among other factors, our results of operations, financial condition, capital requirements, contractual restrictions, business prospects and other factors our board of directors may deem relevant. In addition, unless waived, the terms of our
amended and restated loan and security agreement with Oxford Finance Corporation and Silicon Valley Bank prohibit us from paying dividends on our common stock.

63

CAPITALIZATION

The following table sets forth our cash and cash equivalents and capitalization as of September 30, 2010:



on an actual basis; and



on a pro forma as adjusted basis to give effect to the following transactions as if they had occurred as of September 30, 2010:

(1) the sale of 6,000,000 shares of common stock in this
offering and our receipt of the estimated net proceeds therefrom, based on an assumed initial public offering price of $13.00 per share (the mid-point of the price range set forth on the cover page of this preliminary prospectus) and after deducting
the estimated underwriting discounts and commissions and estimated offering costs payable by us;

(2) the conversion of all outstanding shares of our convertible preferred stock into an aggregate
of 14,239,797 shares of our common stock upon the completion of this offering and the resultant reclassification of our convertible preferred stock warrant liability to stockholders equity (deficit) in connection with such conversion;

(3) the issuance of 198,575 shares of common stock as a result of the expected net
exercise of outstanding warrants, or the Series B Warrants, in connection with the completion of this offering, assuming an initial public offering price of $13.00 per share (the mid-point of the price range set forth on the cover page of this
preliminary prospectus), which Series B Warrants will terminate if unexercised prior to the completion of this offering;

(4) the issuance of 1,190,763 shares of our common stock upon completion of this offering as a result of the automatic conversion of $15.0 million in aggregate principal amount of
convertible promissory notes issued in July 2010, or the 2010 Notes (including accrued interest thereon), assuming an initial public offering price of $13.00 per share (the mid-point of the price range set forth on the cover page of this preliminary
prospectus) and assuming the conversion occurs on November 23, 2010 (the expected closing date of this offering) and the resultant change in the value of the beneficial conversion feature; and

(5) the conversion of our remaining warrants to purchase convertible preferred stock, which
warrants are expected to remain outstanding upon the completion of this offering, into warrants to purchase our common stock.

Because the number of shares that will be issued upon exercise of the Series B Warrants and upon conversion of the 2010 Notes depends upon
the initial public offering price per share in this offering and, in the case of the 2010 Notes, the closing date of this offering, the actual number of shares issuable upon such exercise and conversion will likely differ from the respective numbers
of shares set forth above.

64

The information below
is illustrative only and our capitalization following the completion of this offering will depend on the actual initial public offering price and other terms of this offering determined at pricing. You should read this table together with
Managements Discussion and Analysis of Financial Condition and Results of Operations and our financial statements and the related notes appearing elsewhere in this prospectus.

Each $1.00 increase or decrease in the assumed initial public offering price of $13.00 per share (the mid-point of the price range set forth on the cover page of this
preliminary prospectus) would increase or decrease, respectively, the amount of pro forma as adjusted cash and cash equivalents, additional paid-in capital, total stockholders equity and total capitalization by approximately $5.6 million,
assuming the number of shares offered by us, as set forth on the cover page of this preliminary prospectus, remains the same and after deducting the estimated underwriting discounts and commissions and estimated offering costs payable by us.

A $1.00 increase in the assumed initial public offering price of $13.00 per share (the mid-point of the price
range set forth on the cover page of this preliminary prospectus) would increase the number of shares of our common stock issued upon the exercise of the Series B Warrants (and therefore the number of shares to be outstanding after this offering) by
78,026 shares. A $1.00 decrease in the assumed initial public offering price of $13.00 per share (the mid-point of the price range set forth on the cover page of this preliminary prospectus) would decrease the number of shares of our common stock
issued upon the exercise of the Series B Warrants (and therefore the number of shares to be outstanding after this offering) by 91,028 shares.

A $1.00 increase in the assumed initial public offering price of $13.00 per share (the mid-point of the price range set forth on the cover page of this preliminary prospectus) would decrease the number of
shares of our common stock issued on conversion of the 2010 Notes (and therefore the number of pro forma as adjusted shares to be outstanding after this offering) by 85,056 shares, assuming that the closing date of this offering (and therefore the
conversion date of the notes) is November 23, 2010. A $1.00 decrease in the assumed initial public offering price of $13.00 per share (the mid-point of the price range set forth on the cover page of this preliminary prospectus) would increase the
number of shares of our common stock issued on conversion of the 2010 Notes (and therefore the number of shares to be outstanding after this offering) by 99,231 shares, assuming that the closing date of this offering (and therefore the conversion
date of the 2010 Notes) is November 23, 2010. To the extent the closing

65

date of this offering occurs after November 23, 2010, the 2010 Notes will continue to accrue interest at a rate of 8% per annum and additional shares of our common stock will be issued upon
conversion of this additional accrued interest. Likewise, if the closing date occurs prior to November 23, 2010, fewer shares will be issued on conversion of the 2010 Notes.

The number of pro forma as adjusted shares of common stock shown in the prior table excludes:



256,816 shares of common stock issuable upon the exercise of warrants outstanding as of September 30, 2010, at a weighted average exercise price
of $10.92 per share, which warrants are expected to remain outstanding upon completion of this offering;



1,482,780 shares of common stock issuable upon the exercise of options outstanding as of September 30, 2010, at a weighted average exercise price
of $3.36 per share;



2,000,000 additional shares of common stock reserved for future issuance under our 2010 Equity Incentive Award Plan, or the 2010 Plan, which will
become effective immediately prior to the completion of this offering, plus 233,689 shares of common stock reserved for future grant or issuance under our 2006 Equity Incentive Plan, or the 2006 Plan, as of September 30, 2010, which shares will
be added to the shares to be reserved under our 2010 Plan upon the effectiveness of the 2010 Plan, plus any annual increases in the number of shares of common stock reserved for future issuance under the 2010 Plan pursuant to an evergreen
provision and any other shares that may become issuable under the 2010 Plan pursuant to its terms, as more fully described in Compensation Discussion and Analysis  Employee Equity Incentive Plans  2010 Equity Incentive Award
Plan; and



500,000 shares of common stock reserved for issuance under our 2010 Employee Stock Purchase Plan, or the Purchase Plan, which will become effective
following the completion of this offering, plus any annual increases in the number of shares of common stock reserved for issuance under the Purchase Plan pursuant to an evergreen provision, as more fully described in Compensation
Discussion and Analysis  Employee Equity Incentive Plans  2010 Employee Stock Purchase Plan.

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DILUTION

If you invest in our common stock in this offering, your interest will be diluted to the extent of the difference between the initial public offering price per share of our common stock and the pro forma
as adjusted net tangible book value per share of our common stock upon the completion of this offering.

As of September
30, 2010, our historical net tangible book value (deficit) of our common stock was approximately $(183.8) million, or approximately $(126.72) per share, based on 1,450,249 shares of our common stock outstanding at September 30, 2010. Our
historical net tangible book value (deficit) per share represents the amount of our total tangible assets reduced by the amount of our total liabilities and convertible preferred stock, divided by the total number of shares of our common stock
outstanding as of September 30, 2010.

On a pro forma basis as of September 30, 2010, after giving effect to (1) the
conversion of all outstanding shares of our convertible preferred stock into an aggregate of 14,239,797 shares of our common stock upon the completion of this offering and the resultant reclassification of our convertible preferred stock warrant
liability to stockholders equity (deficit) in connection with such conversion; (2) the issuance of 198,575 shares of common stock as a result of the expected net exercise of outstanding warrants, or the Series B Warrants, in connection with
the completion of this offering, assuming an initial public offering price of $13.00 per share (the mid-point of the price range set forth on the cover page of this preliminary prospectus), which Series B Warrants will terminate if unexercised prior
to the completion of this offering; (3) the issuance of 1,190,763 shares of our common stock upon completion of this offering as a result of the automatic conversion of $15.0 million in aggregate principal amount of convertible promissory
notes issued in July 2010, or the 2010 Notes (including accrued interest thereon), assuming an initial public offering price of $13.00 per share (the mid-point of the price range set forth on the cover page of this preliminary prospectus) and
assuming the conversion occurs on November 23, 2010 (the expected closing date of this offering); and (4) the conversion of our remaining outstanding warrants to purchase convertible preferred stock, which warrants are expected to remain
outstanding upon the completion of this offering, into warrants to purchase our common stock, the pro forma net tangible book value (deficit) of our common stock would have been approximately $(4.4) million, or approximately $(0.26) per share of our
pro forma outstanding common stock.

Because the number of shares that will be issued upon exercise of the Series B
Warrants and upon conversion of the 2010 Notes depends upon the initial public offering price per share in this offering and, in the case of the 2010 Notes, the closing date of this offering, the actual number of shares issuable upon such exercise
and conversion will likely differ from the respective number of shares set forth above.

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Investors participating in this offering will incur immediate, substantial dilution.
After giving effect to (1) the sale of 6,000,000 shares of common stock in this offering at an assumed initial public offering price of $13.00 per share (the mid-point of the price range set forth on the cover page of this preliminary
prospectus) and after deducting the estimated underwriting discounts and commissions and estimated offering costs payable by us, and (2) the pro forma transactions and other adjustments described in the second preceding paragraph, our pro forma
as adjusted net tangible book value of our common stock as of September 30, 2010 would have been approximately $65.9 million, or approximately $2.86 per share of our pro forma as adjusted outstanding common stock. This represents an immediate
increase in pro forma as adjusted net tangible book value of $3.12 per share to our existing stockholders and an immediate dilution in the pro forma as adjusted net tangible book value of $10.14 per share to investors participating in this offering.
The following table illustrates this per share dilution:

Assumed initial public offering price per share (the mid-point of the price range set forth on the cover page of this preliminary
prospectus)

$

13.00

Historical net tangible book value (deficit) per share as of September 30, 2010

$

(126.72

)

Pro forma increase in net tangible book value (deficit) per share attributable to pro forma transactions described in the third
preceding paragraph

126.46

Pro forma net tangible book value (deficit) per share before this offering

(0.26

)

Increase in pro forma net tangible book value per share attributable to investors participating in this offering

3.12

Pro forma as adjusted net tangible book value (deficit) per share after this offering

$

2.86

Pro forma as adjusted dilution per share to investors in this offering

$

10.14

If the underwriters fully exercise their option to purchase 900,000 additional shares of common
stock in the offering, our pro forma as adjusted net tangible book value per share after this offering would be $3.20 per share, the increase in our pro forma as adjusted net tangible book value per share attributable to investors participating in
this offering would be $3.46 per share and the pro forma as adjusted dilution per share to new investors in this offering would be $9.80 per share.

The following table summarizes, on the pro forma as adjusted basis described above, as of September 30, 2010, the differences between the number of shares of common stock purchased from us, the total
effective cash consideration paid to us and the average price per share paid to us by our existing stockholders and by investors participating in this offering based on an assumed initial public offering price of $13.00 per share (the mid-point of
the price range set forth on the cover page of this preliminary prospectus) before deducting estimated underwriting discounts and commissions and estimated offering costs payable by us, as if those transactions had occurred as of September 30, 2010:

Shares Purchased

Total Consideration

Average PricePer
Share

Number

Percent

Amount

Percent

Existing stockholders before this offering

17,079,384

74.0

%

$

165,477,799

68.0

%

$

9.69

Investors participating in this offering

6,000,000

26.0

78,000,000

32.0

13.00

Total

23,079,384

100.0

%

$

243,477,799

100.0

%

If the underwriters fully exercise their option to purchase 900,000 additional shares of
common stock in this offering, our existing stockholders would own 71.2% and our new investors would own 28.8% of the total number of shares of our common stock outstanding upon completion of this offering.

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The number of shares of
common stock shown in the table is based on:



15,690,046 shares of common stock outstanding as of September 30, 2010, after giving effect to the conversion of all outstanding shares of our
convertible preferred stock into 14,239,797 shares of common stock upon completion of this offering;



the issuance of 198,575 shares of common stock as a result of the expected net exercise of the Series B Warrants in connection with the completion of
this offering, assuming an initial public offering price of $13.00 per share (the mid-point of the price range set forth on the cover page of this preliminary prospectus), which Series B Warrants will terminate if unexercised prior to the completion
of this offering; and



the issuance of 1,190,763 shares of our common stock upon completion of this offering as a result of the automatic conversion of the $15.0 million in
aggregate principal amount of the 2010 Notes (including accrued interest thereon), assuming an initial public offering price of $13.00 per share (the mid-point of the price range set forth on the cover page of this preliminary prospectus) and
assuming the conversion occurs on November 23, 2010 (the expected closing date of this offering).

Because the number of shares that will be issued upon exercise of the Series B Warrants and upon conversion of the 2010 Notes depends
upon the initial public offering price per share in this offering and, in the case of the 2010 Notes, the closing date of this offering, the actual number of shares issuable upon such exercise and conversion will likely differ from the respective
numbers of shares set forth above.

For purposes of all of the data in this section, the number of shares of common stock to be
outstanding after this offering excludes:



256,816 shares of common stock issuable upon the exercise of warrants outstanding as of September 30, 2010, at a weighted average exercise price of
$10.92 per share, which warrants are expected to remain outstanding upon completion of this offering;



1,482,780 shares of common stock issuable upon the exercise of options outstanding as of September 30, 2010, at a weighted average exercise price of
$3.36 per share;



2,000,000 additional shares of common stock reserved for future issuance under our 2010 Equity Incentive Award Plan, or the 2010 Plan, which will
become effective immediately prior to the completion of this offering, plus 233,689 shares of common stock reserved for future grant or issuance under our 2006 Equity Incentive Plan, or the 2006 Plan, as of September 30, 2010, which shares will be
added to the shares to be reserved under our 2010 Plan upon the effectiveness of the 2010 Plan, plus any annual increases in the number of shares of common stock reserved for future issuance under the 2010 Plan pursuant to an evergreen
provision and any other shares that may become issuable under the 2010 Plan pursuant to its terms, as more fully described in Compensation Discussion and Analysis  Employee Equity Incentive Plans  2010 Equity Incentive Award
Plan; and



500,000 shares of common stock reserved for issuance under our 2010 Employee Stock Purchase Plan, or the Purchase Plan, which will become effective
following the completion of this offering, plus any annual increases in the number of shares of common stock reserved for issuance under the Purchase Plan pursuant to an evergreen provision, as more fully described in Compensation
Discussion and Analysis  Employee Equity Incentive Plans  2010 Employee Stock Purchase Plan.

To the extent that outstanding options or warrants that are expected to remain outstanding upon the completion of this offering are
exercised, you will experience further dilution. If all of such outstanding options and warrants were exercised, our pro forma as adjusted net tangible book value (deficit) as of

69

September 30, 2010 (calculated on the basis of the assumptions set forth above) would have been approximately $73.7 million, or approximately $2.97 per share, causing immediate pro forma as
adjusted dilution of $10.03 per share to investors participating in this offering.

In addition, we may choose to raise
additional capital due to market conditions or strategic considerations even if we believe we have sufficient funds for our current or future operating plans. To the extent that we raise additional capital by issuing equity securities or convertible
debt, your ownership will be further diluted.

70

SELECTED FINANCIAL DATA

The following table summarizes certain of our selected financial data. The selected financial data for the years ended December 31, 2007, 2008 and 2009 and the period from inception (August 25, 2006)
through December 31, 2006 have been derived from our audited financial statements, of which the 2007, 2008 and 2009 financial statements are included elsewhere in this prospectus. The selected financial data for the nine months ended September
30, 2009 and 2010 and the balance sheet data as of September 30, 2010 have been derived from our unaudited interim financial statements which are included elsewhere in this prospectus. The unaudited interim financial statements have been prepared on
the same basis as the audited financial statements and reflect all adjustments, consisting primarily of normal recurring adjustments, that, in the opinion of our management, are necessary to fairly present our financial position as of September 30,
2010 and results of operations for the nine months ended September 30, 2009 and 2010. Our historical results and financial condition are not necessarily indicative of the results or financial condition that may be expected in the future. The
selected financial data set forth below should be read together with our financial statements and related notes and Managements Discussion and Analysis of Financial Condition and Results of Operations included elsewhere in this
prospectus.

Inception(August 25, 2006)throughDecember 31,2006

Year Ended December 31,

Nine Months EndedSeptember
30,

2007

2008

2009

2009

2010

(In Thousands, Except Per Share Amounts)

Statement of Operations Data

Revenue:

Net product revenue

$



$



$



$



$



$

11,828

Contract revenue











2,810

Total revenue











14,638

Operating expenses:

Cost of sales











9,403

Royalty expense











598

Research and development

4,902

24,329

33,910

21,438

22,305

19,394

Selling, general and administrative

1,474

4,725

11,820

14,102

8,027

36,792

Total operating expenses

6,376

29,054

45,730

35,540

30,332

66,187

Loss from operations

(6,376

)

(29,054

)

(45,730

)

(35,540

)

(30,332

)

(51,549

)

Other income (expense):

Interest income

395

927

696

10

7

4

Interest expense



(377

)

(1,718

)

(9,188

)

(8,563

)

(6,938

)

Change in fair value of warrant liability



(107

)

1,119

(755

)

(505

)

(12,833

)

Other financing income

582

906









Other income (expense)



25

63

(416

)

(350

)

(113

)

Total other income (expense)

977

1,374

160

(10,349

)

(9,411

)

(19,880

)

Net loss

(5,399

)

(27,680

)

(45,570

)

(45,889

)

(39,743

)

(71,429

)

Deemed dividend for the beneficial conversion on Series A-1 and Series A-2 convertible preferred stock

See Note 2 of Notes to Financial Statements for an explanation of the method used to calculate net loss per share and the number of shares used in the computation
of the per share amounts.

71

As of December 31,

As
ofSeptember 30,2010

2006

2007

2008

2009

(In Thousands)

Balance Sheet Data:

Cash and cash equivalents and investment securities, available for sale

$

22,103

$

43,255

$

14,225

$

44,911

$

11,673

Working capital

20,035

38,836

3,032

42,102

(920

)

Total assets

26,942

53,007

27,625

74,568

55,034

Long-term debt, less current portion



2,870

15,336

8,778

22,390

Convertible preferred stock warrant liability



259

467

5,041

20,301

Convertible preferred stock

27,110

76,955

76,955

149,312

149,312

Accumulated deficit

(5,399

)

(33,079

)

(78,649

)

(124,538

)

(195,967

)

Total stockholders equity (deficit)

(5,385

)

(32,926

)

(77,534

)

(122,300

)

(183,780

)

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MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Selected Financial Data and our financial statements and
related notes appearing elsewhere in this prospectus. In addition to historical information, this discussion and analysis contains forward-looking statements that involve risks, uncertainties and assumptions. Our actual results may differ materially
from those anticipated in these forward-looking statements as a result of certain factors, including, but not limited, to those set forth under Risk Factors and elsewhere in this prospectus.

Overview

Background

We are
a pharmaceutical company commercializing and developing products for the treatment of central nervous system disorders and pain. Our first commercial product, Sumavel DosePro (sumatriptan injection) Needle-free Delivery System, offers
fast-acting, easy-to-use, needle-free subcutaneous administration of sumatriptan for the acute treatment of migraine and cluster headache in a pre-filled, single-use delivery system. We launched the commercial sale of Sumavel DosePro in the
United States in January 2010 with our co-promotion partner, Astellas Pharma US, Inc., or Astellas. Our sales and marketing organization is comprised of approximately 100 professionals. Our field sales force of approximately 80 representatives is
promoting Sumavel DosePro primarily to neurologists and other key prescribers of migraine medications, including headache clinics and headache specialists. Our promotional efforts are complemented by our collaboration with Astellas and approximately
400 of its sales representatives, who are promoting Sumavel DosePro primarily to primary care physicians, OB/GYNs, emergency medicine physicians and urologists in the United States, or the Astellas Segment. Our lead product candidate, ZX002, is a
novel, oral, single-entity controlled-release formulation of hydrocodone currently in Phase 3 clinical trials for the treatment of moderate to severe chronic pain in patients requiring around-the-clock opioid therapy. We initiated the Phase 3
clinical development program for ZX002 in March 2010 and, if successful, expect to submit a New Drug Application, or NDA, with the U.S. Food and Drug Administration, or FDA, by early 2012. We in-licensed exclusive U.S. rights to ZX002 from Elan
Pharma International Limited, or Elan, in 2007.

We have experienced net losses and negative cash flow from operating
activities since inception, and as of September 30, 2010, had an accumulated deficit of $196.0 million. We expect to continue to incur net losses and negative cash flow from operating activities for at least the next several years primarily as
a result of the development expenses in connection with clinical trials and pre-clinical studies for ZX002 and the cost of the sales and marketing expenses associated with Sumavel DosePro. As of September 30, 2010, we had cash and cash
equivalents of $11.7 million. Although it is difficult to predict future liquidity requirements, we believe that the net proceeds from this offering, together with our existing cash and cash equivalents, future product revenues and borrowings
available under our $10.0 million revolving credit facility, will be sufficient to fund our operations for at least the next 12 months. However, successful transition to profitability is dependent upon achieving a level of revenues adequate to
support our cost structure. We cannot assure you that we will ever be profitable or generate positive cash flow from operating activities and, unless and until we do, we will need to raise additional capital through debt or equity financings or
through collaborations or partnerships with other companies. We may not be able to raise additional capital on terms acceptable to us, or at all, and any failure to raise capital as and when needed would have a negative impact on our results of
operations, financial condition and our ability to execute on our business plan. In its report on our financial statements for the year ended December 31, 2009, our independent registered public accounting firm included an explanatory paragraph
expressing substantial doubt regarding our ability to continue as a going concern.

73

Co-Promotion Agreement

Under our co-promotion agreement with Astellas that we entered into in July 2009, or the co-promotion agreement,
Astellas primarily promotes Sumavel DosePro to the Astellas Segment in the United States. Our sales force promotes Sumavel DosePro primarily to neurologists and other key prescribers of migraine medications, including headache clinics and headache
specialists in the United States. We jointly share in the cost of advertising, marketing and other promotional activities related to the Sumavel DosePro brand and are required to provide minimum levels of sales effort to promote Sumavel DosePro.
Under the co-promotion agreement, we are responsible for the manufacture, supply and distribution of all Sumavel DosePro commercial product and are principally responsible for entering into any contracts and other arrangements with third parties
regarding the sale of Sumavel DosePro.

At the inception of the co-promotion agreement and in exchange for the right to promote
Sumavel DosePro, Astellas made a non-refundable up-front payment of $2.0 million to us and agreed to make an additional $18.0 million of payments to us upon the achievement of a series of milestones. As of December 31, 2009, we had received a
total of $19.0 million from Astellas. The remaining $1.0 million was paid to us in March 2010. These proceeds are reflected as deferred revenues on our balance sheets at December 31, 2009 and September 30, 2010. Beginning with the launch of
Sumavel DosePro in January 2010, we began recognizing these proceeds as contract revenues on a ratable basis over the remaining term of the agreement, which remains in effect through June 30, 2013, subject to extension by one year at
Astellas option, contingent upon payment of a predetermined option fee.

In consideration for Astellas performance
of its commercial efforts, we are required to pay Astellas a service fee on a quarterly basis that represents a fixed percentage of between 45% and 55% of Sumavel DosePro net sales to the Astellas Segment. In addition, upon completion of the
co-promotion term, Astellas will be eligible to receive two additional annual tail payments calculated as decreasing fixed percentages (ranging from a mid-twenties down to a mid-teen percentage) of net sales in the Astellas Segment in the last 12
months of its active promotion. Astellas pays us the lesser of our direct out-of-pocket costs or a fixed fee for all sample units they order for distribution to their sales force. Amounts received from Astellas for shared marketing costs and sample
product are reflected as a reduction of selling, general and administrative expenses, and amounts payable to Astellas for shared marketing expenses and service fees are reflected as selling, general and administrative expenses. For the nine months
ended September 30, 2010, we incurred $2.2 million in service fee expenses.

We record the revenues related to all products
sales, including sales generated by the Astellas sales force. Consequently, we record cost of sales for all product sales.

The
co-promotion agreement may be terminated by Astellas or us for a number of specified reasons, some of which are beyond our control. In the event Astellas terminates the agreement for specified reasons, including our inability to supply commercial
product or a material uncured breach by us of our minimum sales effort obligations, prior to July 31, 2011, we would be required to pay Astellas a specified royalty on net sales of Sumavel DosePro up to an aggregate specified dollar amount. Any
such payments would be in lieu of the annual tail payments described above. We depend on Astellas and its sales force to promote Sumavel DosePro to the Astellas Segment and any inability of its sales force to effectively sell the product or any
termination of the co-promotion agreement could have a material adverse effect on our results of operations and financial condition.

Revenues

Through
the year ended December 31, 2009, we did not generate any product revenues or recognize any contract revenues. During the nine months ended September 30, 2010, we began recognizing product revenues from sales of Sumavel DosePro made by us and
Astellas under our co-promotion agreement. During this same period, we began recognizing contract revenues from license and milestone payments received under the Astellas co-promotion agreement. We recognized

74

$11.8 million in net product revenues since the commercial launch of Sumavel DosePro in January 2010 through September 30, 2010. We recognized $2.8 million in contract revenues associated
with license and milestone payments made to us by Astellas under the co-promotion agreement through September 30, 2010.

We sell Sumavel DosePro product in a package of six pre-filled, single-dose units to wholesale pharmaceutical distributors, and on a
limited basis to retail pharmacies, or, collectively, our customers, at a wholesale acquisition cost, or gross sales price, of $498 per package as of September 30, 2010. Sales to our customers are subject to specified rights of return. We
currently defer recognition of revenue on product shipments of Sumavel DosePro to our customers until the right of return no longer exists, which occurs at the earlier of the time Sumavel DosePro units are dispensed through patient prescriptions or
expiration of the right of return. We do not have significant history estimating the number of patient prescriptions dispensed. If we underestimate or overestimate patient prescriptions dispensed for a given period, adjustments to net product
revenue may be necessary in future periods.

As a result of this policy, of the $16.4 million in gross product sales of Sumavel
DosePro to our customers for the nine months ended September 30, 2010, we recognized $11.8 million in product revenue for the same period, which is net of estimated wholesaler and retail pharmacy discounts, stocking allowances, prompt pay discounts,
chargebacks, rebates and patient discount programs. We had a deferred revenue balance of $2.8 million at September 30, 2010 for Sumavel DosePro product shipments, which is net of estimated wholesaler and retail pharmacy discounts, stocking
allowances, prompt pay discounts, chargebacks, rebates and patient discount programs.

We will continue to recognize revenue
upon the earlier to occur of prescription units dispensed or expiration of the right of return until we can reliably estimate product returns, at which time we will record a one-time increase in net revenue related to the recognition of revenue
previously deferred.

Cost of Sales

Cost of sales consist primarily of materials, third-party manufacturing costs, freight and indirect personnel and other overhead costs associated with sales of Sumavel DosePro based on units dispensed
through patient prescriptions, as well as reserves for excess, dated or obsolete commercial inventories and production manufacturing variances. For the nine months ended September 30, 2010, our cost of sales was $9.4 million. The cost of sales
associated with the deferred product revenues are recorded as deferred costs, which are included in inventory, until such time the deferred revenue is recognized. Deferred cost of sales totaled $0.8 million at September 30, 2010.

Royalty Expense

Royalty expense consists of the amortization of the $4.0 million milestone payment paid by us to Aradigm Corporation upon the first
commercial sale of Sumavel DosePro in the United States (which occurred in January 2010) and royalties payable to Aradigm based on net sales of Sumavel DosePro by us or one of our licensees. We are not required to make any further milestone payments
to Aradigm. Our ongoing royalty obligation payable to Aradigm is set forth in the asset purchase agreement we entered into with Aradigm in August 2006 pursuant to which we acquired the rights to the DosePro technology. During the nine months ended
September 30, 2010, we incurred $0.6 million in royalty expense to Aradigm.

Research and Development Expenses

Our research and development expenses consist of expenses incurred in developing, testing and seeking marketing approval of our product
candidates, including:



payments made to third-party contract research organizations, or CROs, and investigational sites, which conduct our trials on our behalf, and
consultants;



expenses associated with regulatory submissions, preclinical development and clinical trials;

payments made to third-party CROs, laboratories and consultants in connection with preclinical studies;



personnel related expenses, such as salaries, benefits, travel and other related expenses, including stock-based compensation; and



facility, maintenance, depreciation and other related expenses.

We expense all research and development costs as incurred. Our research and development expenses through December 31, 2009 consisted
primarily of costs associated with preclinical testing, clinical development, regulatory activities and the manufacturing development of Sumavel DosePro. These expenses include payments to contract manufacturing organizations. We received FDA
approval for Sumavel DosePro in July 2009, after which we began capitalizing costs as inventory related to the production of Sumavel DosePro, including the cost of materials, third-party manufacturing costs, freight and indirect personnel and other
overhead costs.

In March 2010, we initiated our Phase 3 clinical development program for ZX002. We utilize CROs, contract
laboratories and independent contractors for the conduct of preclinical studies and clinical trials. In 2010, we began tracking third party costs by type of study being conducted. We recognize the expenses associated with the services provided by
CROs based on the percentage of each study completed at the end of each reporting period. We coordinate clinical trials through a number of contracted investigational sites and recognize the associated expense based on a number of factors, including
actual and estimated subject enrollment and visits, direct pass-through costs and other clinical site fees. For the nine months ended September 30, 2010, we incurred $11.9 million and $1.1 million in third party research and development costs
related to ZX002 and Sumavel DosePro, respectively.

We use our employee and infrastructure resources across our product and
product candidate development programs. Therefore, we have not tracked salaries, other personnel related expenses, facilities or other related costs to our product development activities on a program-by-program basis. However, we estimate that the
majority of our research and development expenses incurred to date are attributable to our Sumavel DosePro program. The following table illustrates, for each period presented, our research and development costs broken down by major categories of the
cost:

Inception (August
25,2006) through
December 31,2006

Year Ended December 31,

Nine Months EndedSeptember 30,

2007

2008

2009

2009

2010

(In Thousands)

Research and development expenses:

Manufacturing development expenses

$

2,747

$

13,701

$

22,381

$

13,772

$

17,488

$



Clinical/regulatory expenses

835

10,628

11,529

7,666

4,817

19,394

Purchased in-process research and development(1)

1,320











Total

$

4,902

$

24,329

$

33,910

$

21,438

$

22,305

$

19,394

(1)

This amount represents the value allocated to the DosePro technology in connection with the asset and technology purchased from Aradigm in 2006.

76

We expect our research
and development costs for 2010 will be higher than in 2009 as we progress through the Phase 3 clinical program of ZX002. At this time, due to the inherently unpredictable nature of clinical development we are unable to estimate with any certainty
the costs we will incur in the continued development of ZX002. These expenditures are subject to numerous uncertainties regarding timing and cost to completion. Completion of our Phase 3 clinical trials may take longer than currently estimated. The
cost of clinical trials may vary significantly over the life of a project as a result of differences arising during clinical development, including, among others:



the number of sites included in the trials;



the length of time required to enroll suitable subjects;



the duration of subject follow-ups;



the length of time required to collect, analyze and report trial results;



the cost, timing and outcome of regulatory review; and



potential changes by the FDA in clinical trial and NDA filing requirements for a specific therapeutic area.

In addition, we may be obligated to pay Elan, from whom we in-licensed exclusive rights to ZX002 in November 2007, up to $4.5 million in
total future milestone payments with respect to ZX002 depending upon the achievement of various development and regulatory events. If ZX002 is approved, we are also required to pay a mid single-digit percentage royalty on its net sales for a
specified period of time and continue to pay royalties on net sales of the product thereafter at a reduced low single-digit percentage rate in accordance with the terms of the license agreement.

If our Phase 3 clinical trials are successful, we expect to submit an NDA for ZX002 with the FDA by early 2012. However, the successful
development and commercialization of ZX002 is highly uncertain. We also expect to incur customary regulatory costs associated with the NDA, if and when submitted, which will be significant. If ZX002 is approved, we also expect to incur significant
expenses related to manufacturing and marketing activities. However, at this time, we cannot reasonably estimate or know the nature, specific timing and estimated costs of the efforts that will be necessary to complete the remainder of the
development of ZX002, if or when ZX002 will receive regulatory approval and, if approved, if and when material net cash inflows may commence from ZX002 or the amount of any such inflows. This is due to the numerous risks and uncertainties associated
with developing and commercializing drugs, including the uncertainty of:



the costs, timing and outcome of our clinical trials and pre-clinical studies of ZX002;



the costs, timing and outcome of regulatory review of ZX002;



the costs of commercialization activities, including product marketing, sales and distribution;



the potential for future collaborations, when such arrangements will be secured, if at all, and to what degree such arrangements would affect our
development and commercialization plans and capital requirements;

the emergence of competing technologies and products and other adverse marketing developments;



the effect on our product development activities of actions taken by the FDA or other regulatory authorities; and



our degree of success in commercializing ZX002, if approved.

77

A change in the outcome
of any of these variables with respect to the development of ZX002 could mean a significant change in the costs and timing associated with these efforts.

We also expect to incur costs associated with preclinical studies and formulation work for our early-stage product candidates. However, at this time, due to the inherently unpredictable nature of
preclinical development and given the early stage of such product candidates, we are unable to estimate with any certainty the costs we will incur for such preclinical work.

Selling, General and Administrative Expenses

Through the fiscal
year ended December 31, 2009, our selling expenses, which include sales and marketing costs, have consisted primarily of salaries, benefits, consulting fees and market research studies related to preparation for the launch of Sumavel DosePro,
including shared marketing and advertising costs under our co-promotion agreement with Astellas. In the fourth quarter of 2009 and in the first quarter of 2010, we expanded our commercial infrastructure, including the hiring of sales and marketing
management and sales representatives. In addition, in 2010 we began incurring service fee costs for promotional efforts provided by Astellas and sample product costs.

Our general and administrative expenses consist primarily of salaries and related costs for personnel in executive, finance, accounting, business development and internal support functions. In addition,
general and administrative expenses include facility costs and professional fees for legal, consulting and accounting services. We expect general and administrative expense to increase as we begin to operate as a public company. These increases
likely will include salaries and related expenses, legal and consultant fees, accounting fees, director fees, increased directors and officers insurance premiums, fees for investor relations services and enhanced business and accounting
systems.

Interest Income

Interest income consists of interest earned on our cash and cash equivalents.

Interest
Expense

Interest expense consists of interest incurred in connection with the $4.5 million borrowed under our loan and
security agreement with General Electric Capital Corporation, or GE Capital, entered into in March 2007, our $18.0 million loan and security agreement with Oxford Finance Corporation, or Oxford, and CIT Healthcare LLC, or CIT, entered into in June
2008, non-cash interest expense associated with amortization of debt discount and debt issuance costs and non-cash interest expense associated with the fair value of the beneficial conversion feature on convertible promissory notes we issued to
certain investors between February 2009 and July 2009 in an aggregate amount of $14.8 million, or the 2009 Notes.

In July and
October 2010, we amended and restated the loan and security agreement with Oxford and CIT, and Oxford and Silicon Valley Bank, or SVB, are now party to that amended and restated agreement, or the amended Oxford loan agreement. The amended Oxford
loan agreement consists of a $25.0 million term loan and a $10.0 million revolving credit facility. New warrants were issued to Oxford and SVB in connection with the amended Oxford loan agreement. In connection with the execution of the amended
Oxford loan agreement, we repaid the outstanding balance of the Oxford and CIT loan and security agreement totaling $12.8 million at June 30, 2010, which amount was repaid with borrowings under the amended Oxford loan agreement. Consequently,
the net proceeds we received upon the execution of the amended Oxford loan agreement totaled $12.2 million. As of September 30, 2010, we had borrowed $2.7 million under the revolving credit facility. Concurrently with the amended Oxford loan
agreement, we issued $15.0 million in new convertible promissory notes, or the 2010 Notes, to current investors. As a result of additional borrowings under the amended Oxford loan agreement and the 2010 Notes, interest expense will increase over
2009 levels.

78

Change in Fair Value of Warrant
Liability

Change in fair value of warrant liability represents non-cash (expense) income associated with changes in
the fair value of the warrants to purchase preferred stock issued to GE Capital, Oxford, CIT and current investors.

Upon
consummation of this offering, the liability reflected on our consolidated balance sheet for convertible preferred stock warrants will be reclassified to stockholders equity (deficit) and we will no longer be required to record the change in
fair value of these warrants in the statement of operations.

Other Income (Expense)

Other income (expense) consists of foreign currency transaction gains and losses. All of our revenues are currently generated in U.S.
dollars while a majority of our manufacturing expenses are payable in foreign currencies, primarily U.K. pounds sterling and the Euro.

Net Operating Loss and Tax Credit Carryforwards

As of December 31, 2009, we had federal and state net operating loss carryforwards of approximately $108.4 million and $105.1 million, respectively. If not utilized, the net operating loss
carryforwards will begin expiring in 2026 for federal tax purposes and 2016 for state tax purposes. As of December 31, 2009, we had federal and state research and development tax credit carryforwards of approximately $0.9 million and $0.9
million, respectively. The federal tax credits will begin expiring in 2026 unless previously utilized and the state tax credits carry forward indefinitely.

Under Section 382 of the Internal Revenue Code of 1986, as amended, or the Internal Revenue Code, or IRC, substantial changes in our ownership may limit the amount of net operating loss and research
and development income tax credit carryforwards that could be utilized annually in the future to offset taxable income. Specifically, this limitation may arise in the event of a cumulative change in ownership of our company of more than 50% within a
three-year period. Any such annual limitation may significantly reduce the utilization of the net operating loss carryforwards before they expire. We performed a Section 382 and 383 analysis and determined that we had one ownership change, as
defined by IRC Sections 382 and 383, which occurred in August 2006 upon the issuance of Series A-1 preferred shares. As a result of this ownership change, we reduced our net operating loss carryforwards by $1.9 million. The closing of this offering,
together with private placements and other transactions that have occurred since our inception, may trigger an ownership change pursuant to Sections 382 and 383, which could further limit the amount of net operating loss carryforwards that could be
utilized annually in the future to offset taxable income, if any. Any such limitation, whether as the result of this offering, prior private placements, sales of common stock by our existing stockholders or additional sales of common stock by us
after this offering, could have an adverse effect on our results of operations in future years. In each period since our inception, we have recorded a valuation allowance for the full amount of our deferred tax asset, as the realization of the
deferred tax asset is uncertain. As a result, we have not recorded any federal or state income tax benefit in our statement of operations.

Internal Control Over Financial Reporting

Assessing our staffing and training procedures to improve our internal control over financial reporting is an ongoing process. We are not currently required to comply with Section 404 of the
Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, and are therefore not required to make an assessment of the effectiveness of our internal control over financial reporting. Further, our independent registered public accounting firm has not
been engaged to express, nor have they expressed, an opinion on the effectiveness of our internal control over financial reporting.

For the year ending December 31, 2011, pursuant to Section 404 of the Sarbanes-Oxley Act, management will be required to deliver a report that assesses the effectiveness of our internal control

79

over financial reporting. Under current Securities and Exchange Commission, or SEC, rules, our independent registered public accounting firm will also be required to deliver an attestation report
on the effectiveness of our internal control over financial reporting beginning with the year ending December 31, 2011, unless we qualify for an exemption as a non-accelerated filer under the Dodd-Frank Wall Street Reform and Consumer
Protection Act, enacted on July 21, 2010. Although we may qualify for an exemption from the requirements of Section 404 of the Sarbanes-Oxley Act, as a result of provisions in the Dodd-Frank Wall Street Reform and Protection Act, we currently
do not intend to take advantage of the exception even if it is available to us.

Critical Accounting Policies and Estimates

Our managements discussion and analysis of our financial condition and results of operations is based on our
financial statements, which have been prepared in conformity with generally accepted accounting principles in the United States, or GAAP. The preparation of these financial statements requires us to make estimates and assumptions that affect the
reported amounts of assets, liabilities, expenses and related disclosures. Actual results could differ from those estimates.

While our significant accounting policies are more fully described in Note 2 to our financial statements appearing elsewhere in this
prospectus, we believe the following accounting policies to be critical to the judgments and estimates used in the preparation of our financial statements.

Revenue Recognition

We recognize revenues from the sale of Sumavel
DosePro and from license fees and milestones earned on collaborative arrangements. Revenue is recognized when there is persuasive evidence that an arrangement exists, delivery has occurred and title has passed, the price is fixed or determinable and
we are reasonably assured of collecting the resulting receivable.

Product Revenue

Sales of Sumavel DosePro to our customers are subject to rights of return within a period beginning six months prior to, and ending 12
months following, product expiration. Given the limited sales history of Sumavel DosePro, we currently cannot reliably estimate expected returns of the product at the time of shipment. Accordingly, we defer recognition of revenue on product
shipments of Sumavel DosePro until the right of return no longer exists, which occurs at the earlier of the time Sumavel DosePro units are dispensed through patient prescriptions or expiration of the right of return. Units dispensed are not
generally subject to return. We estimate patient prescriptions dispensed using an analysis of third-party information, including third-party market research data, information obtained from certain wholesalers with respect to inventory levels and
inventory movement and retail pharmacy re-stocking activity. Sumavel DosePro was launched in January 2010 and, accordingly, we do not have significant history estimating the number of patient prescriptions dispensed. If we underestimate or
overestimate patient prescriptions dispensed for a given period, adjustments to revenue may be necessary in future periods.

As
a result of this policy, we recognized $11.8 million in Sumavel DosePro product revenue for the nine months ended September 30, 2010, which is net of estimated wholesaler and retail pharmacy discounts, stocking allowances, prompt pay discounts,
chargebacks, rebates and patient discount programs. We had a deferred revenue balance of $2.8 million at September 30, 2010 for Sumavel DosePro product shipments, which is net of estimated wholesaler and retail pharmacy discounts, stocking
allowances, prompt pay discounts, chargebacks, rebates and patient discount programs.

We will continue to recognize revenue
upon the earlier to occur of prescription units dispensed or expiration of the right of return until we can reliably estimate product returns, at which time we will record a one-time increase in net revenue related to the recognition of revenue
previously deferred. In addition, the costs of manufacturing Sumavel DosePro associated with the deferred revenue are recorded as deferred costs, which are included in inventory, until such time the deferred revenue is recognized.

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Product Sales
Allowances

We recognize products sales allowances as a reduction of product sales in the same period the related
revenue is recognized. Product sales allowances are based on amounts owed or to be claimed on the related sales. These estimates take into consideration the terms of our agreements with customers and third-party payors and the levels of inventory
within the distribution and retail channels that may result in future rebates or discounts taken. In certain cases, such as patient support programs, we recognize the cost of patient discounts as a reduction of revenue based on estimated
utilization. If actual future results vary, we may need to adjust these estimates, which could have an effect on product revenue in the period of adjustment. Our product sales allowances include:

Wholesaler and Retail Pharmacy Discounts. We offer discounts to certain wholesale distributors and retail pharmacies based on
contractually determined rates. We accrue the discount on shipment to the respective wholesale distributors and retail pharmacies and recognize the discount as a reduction of revenue in the same period the related revenue is recognized.

Prompt Pay Discounts. We offer cash discounts to our customers, generally 2% of the sales price, as an incentive for prompt
payment. We account for cash discounts by reducing accounts receivable by the full amount and recognize the discount as a reduction of revenue in the same period the related revenue is recognized.

Chargebacks. We provide discounts to authorized users of the Federal Supply Schedule, or FSS, of the General Services
Administration under an FSS contract negotiated by the Department of Veterans Affairs. These federal entities purchase products from the wholesale distributors at a discounted price, and the wholesale distributors then charge back to us the
difference between the current retail price and the price the federal entity paid for the product. We estimate and accrue chargebacks based on estimated wholesaler inventory levels, current contract prices and historical chargeback activity.

Rebates. We participate in certain rebate programs, which provide discounted prescriptions to qualified insured
patients. Under these rebate programs, we pay a rebate to the third-party administrator of the program, generally two to three months after the quarter in which prescriptions subject to the rebate are filled. We estimate and accrue these rebates
based on current contract prices, historical and estimated future percentages of product sold to qualified patients and estimated levels of inventory in the distribution channel.

Patient Discount Programs. We offer discount card programs to patients for Sumavel DosePro in which patients receive discounts on
their prescriptions that are reimbursed by us. We estimate the total amount that will be redeemed based on levels of inventory in the distribution and retail channels.

Stocking Allowances. We may offer discounts and extended payment terms, generally in the month of the initial commercial launch of a new product, on the first order made by certain wholesale
distributors and retail pharmacies based on contractually determined rates. We accrue the discount on shipment to the respective wholesale distributors and retail pharmacies and recognize the discount as a reduction of revenue in the same period the
related revenue is recognized. Revenue is deferred until the later of expiration of recourse terms under these stocking allowance incentive programs or when prescriptions are filled for these shipments determined based on a first-in, first-out
basis.

In the first quarter of 2010, we provided stocking allowances on initial orders placed by our customers in connection
with the launch of Sumavel DosePro. In accordance with our accounting policy for stocking allowances as disclosed, the allowance provided was accrued at the time of shipment to our customers and recognized as a reduction to revenue in the same
period the related revenue was recognized. There have been no additional orders placed with stocking allowances. The amounts accrued for wholesaler and retail pharmacy discounts and prompt pay discounts were $0.3 million at September 30, 2010 and
none at both December 31, 2009 and 2008. We recognized $0.8 million in reductions to product revenues related to these discounts for the nine months ended September 30, 2010. Contractually agreed upon discounts with our wholesale and retail
customers are typically paid to

81

our customers on a quarterly basis one to two months after the quarter in which product was shipped to the customer. Based on our experience, our customers generally comply with our payment terms
to earn prompt pay discounts. These discounts are measureable at the time of shipment of product to our customers and generally do not vary materially from our estimates.

The amounts accrued for rebates, chargebacks and other incentive programs were $0.3 million at September 30, 2010 and none at both December 31, 2009 and 2008. We recognized $0.6 million in
reductions to product revenues related to these sales allowances for the nine months ended September 30, 2010. Our procedures for estimating amounts accrued for rebates, chargebacks and other incentive programs at the end of any period are
based on available quantitative data and are supplemented by managements judgment with respect to many factors, including but not limited to, current market dynamics, changes in contract terms, impact of new contractual arrangements and
changes in sales trends. Quantitatively, we use historical sales, inventory movement through commercial channels, product utilization and rebate data and apply forecasting techniques in order to estimate our liability amounts. Qualitatively,
managements judgment is applied to these items to modify, if appropriate, the estimated liability amounts. There are inherent risks in this process. For example, patients may not achieve assumed utilization levels; third parties may misreport
their utilization to us; and discounts determined under federal guidelines, which affect our rebate programs with U.S. federal government agencies, may differ from those estimated. On a quarterly basis, we analyze our estimates against actual
rebate, chargeback and incentive program activity and adjust our estimates as necessary. Given our limited history with the commercialization of Sumavel DosePro, we may experience variability in our provisions for these sales allowances as we
continue to initiate new sales initiatives and/or managed care programs in connection with the commercialization of our product. An adjustment to our estimated liabilities for rebates, chargebacks and other incentive programs of 5% of net product
sales on a quarterly basis, based on operating results for the three months ended September 30, 2010, would have resulted in an increase or decrease to net sales for that quarter of approximately $0.2 million to $0.3 million. The sensitivity of
our estimates can vary by program and type of customer. Additionally, there is a time lag between the date we determine the estimated liability and when we actually pay the liability. Due to this time lag, we may record adjustments to our estimated
liabilities over several reporting periods, which can result in a net increase to net revenues or a net decrease to net revenues in those periods. Material differences may result in the amount of revenue we recognize from product sales if the actual
amount of rebates, chargebacks and incentives differ materially from the amounts estimated by management. To date, there have been no material differences between the amount booked in a period and actual charges incurred.

Contract Revenue

We recognize revenues related to license fees and milestone payments received under our co-promotion agreement with Astellas. Revenue arrangements with multiple deliverables are divided into separate
units of accounting if criteria are met, including whether the deliverable has stand-alone value to the customer and the customer has a general right of return relative to the delivered item and delivery or performance of the undelivered item is
probable and substantially within the vendors control. Arrangement consideration is allocated at the inception of the arrangement to all deliverables on the basis of their relative selling price.

In connection with the co-promotion agreement, Astellas made a non-refundable up-front payment of $2.0 million and agreed to make an
additional $18.0 million of payments to us upon the achievement of a series of milestones. As of December 31, 2009, Astellas paid a total of $19.0 million to us. The remaining $1.0 million was paid to us in March 2010.

We identified the deliverables in the co-promotion agreement and divided them into separate units of accounting as follows:
(1) co-exclusive right to promote Sumavel DosePro combined with the manufacturing and supply of commercial and sample product; and (2) sales support of Sumavel DosePro. We concluded both units of accounting require recognition ratably
through the term of the

82

co-promotion agreement, which began with the date of the launch of Sumavel DosePro (January 2010) and ends June 30, 2013, subject to a one-year extension at Astellas option upon
Astellas payment of a pre-determined fee to us, and therefore, the allocation of the upfront and milestone financial consideration is not necessary. Consequently, we recorded the $19.0 million in upfront and milestone payments received from
Astellas as deferred revenue in the balance sheet at December 31, 2009. The final $1.0 million milestone payment was recorded as deferred revenue when received in March 2010. Beginning with the launch of Sumavel DosePro in January 2010, we
began amortizing the license fees and milestone payments as contract revenue in the statement of operations over the term of the co-promotion agreement. Amounts received from Astellas for shared marketing costs are reflected as a reduction of
selling, general and administrative expenses, and amounts payable to Astellas for shared marketing expenses and service fees are reflected as selling, general and administrative expenses.

Inventories and Related Reserves

Inventories are stated at the
lower of cost (FIFO) or market and consist of finished goods, work in progress and raw materials used in the manufacture of Sumavel DosePro. We have significant lead times for the procurement and manufacture of our finished goods and we therefore
order goods from our suppliers and manufacturers based on our forecasts of future demand. To the extent we procure component materials or produce finished goods in excess of actual future demand, we may be required to provide reserves for
potentially excess or dated inventories. We provide such reserves based on an analysis of inventory on hand and on firm purchase commitments compared to forecasts of future sales.

Clinical Trial Expenses

Our expense accruals for clinical trials
are based on estimates of the services received from clinical trial investigational sites and CROs. Payments under some of the contracts we have with such parties depend on factors such as the milestones accomplished, successful enrollment of
certain numbers of patients, site initiation and the completion of clinical trial milestones. In accruing service fees, we estimate the time period over which services will be performed and the level of effort to be expended in each period. If
possible, we obtain information regarding unbilled services directly from these service providers. However, we may be required to estimate these services based on information available to our product development or administrative staff. If we
underestimate or overestimate the activity associated with a study or service at a given point in time, adjustments to research and development expenses may be necessary in future periods. Historically, our estimated accrued liabilities have
approximated actual expense incurred. Subsequent changes in estimates may result in a material change in our accruals.

Stock-Based
Compensation

Stock-based compensation expense is measured at the grant date, based on the estimated fair value of the
award, and is recognized as expense over the employees requisite service period, or vesting period, on a straight-line basis. Equity awards issued to non-employees are recorded at their fair value on the grant date and are periodically
re-measured as the underlying awards vest unless the instruments are fully vested, immediately exercisable and nonforfeitable on the date of grant. Expense recognized for consultant stock options was immaterial for the years ended December 31,
2007, 2008 and 2009 and the nine months ended September 30, 2010.

83

We utilize the
Black-Scholes option-pricing model for determining the estimated fair value of stock-based compensation for stock-based awards to employees and the board of directors. The assumptions used in the Black-Scholes option-pricing model are as follows:

Year Ended December 31,

Nine Months EndedSeptember
30,

2007

2008

2009

2009

2010

Risk free interest rate

3.5% to 4.8%

2.7% to 3.2%

2.3% to 2.8%

2.3% to 2.8%

1.8% to 2.3%

Expected term

1.0 to 6.1 years

5.0 to 6.1 years

5.0 to 6.1 years

5.0 to 6.1 years

5.0 to 6.1 years

Expected volatility

64.4% to 78.1%

80.6% to 86.0%

105.6% to 107.6%

102.7% to 107.6%

94.2% to 95.7%

Expected dividend yield

0.0%

0.0%

0.0%

0.0%

0.0%

Fair value of underlying stock

$0.50 to $16.00

$3.50 to $19.10

$3.20 to $3.60

$3.20

$13.00 to $13.50

The risk-free interest rate assumption was based on the rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued. The assumed dividend
yield was based on our expectation of not paying dividends in the foreseeable future. The weighted average expected term of options was calculated using the simplified method as prescribed by accounting guidance for stock-based compensation. This
decision was based on the lack of relevant historical data due to our limited historical experience. In addition, due to our limited historical data, the estimated volatility was calculated based upon the historical volatility of comparable
companies whose share prices are publicly available. As a result of our use of estimates, if factors cause our assumptions to change, the amount of our stock-based compensation expense could be materially different in the future.

Common Stock Valuation

From inception through September 30, 2010, due to the absence of an active market for our common stock, the exercise prices for all options granted were at the estimated fair value as determined
contemporaneously on the date of grant by our board of directors prepared in accordance with methodologies outlined in the AICPA Practice Aid Valuation of Privately-Held-Company Equity Securities Issued as Compensation. Our board of
directors, which includes members who are experienced in valuing the securities of biotechnology/pharmaceutical companies, considered a number of subjective and objective factors including:



the prices of our convertible preferred stock sold to outside investors in arms-length transactions, and the rights, preferences and privileges of our
convertible preferred stock as compared to those of our common stock, including the liquidation preference of our convertible preferred stock;



our results of operations and financial position, including the first commercial sale of Sumavel DosePro in the United States in January 2010 and the
progression of ZX002 into Phase 3 clinical trials in March 2010;



our stage of development and business strategy;



the market value of a comparison group of publicly held biotechnology/pharmaceutical companies that are in a stage of development similar to ours;



the lack of liquidity of our common stock as a private company;



contemporaneous valuation data provided by management;



the likelihood and timing of achieving a liquidity event for the shares of our common stock, such as an initial public offering, given prevailing
market conditions; and



the material risks related to our business.

84

Based on these
factors, our board of directors granted options at exercise prices ranging from $0.50 per share in February 2007 to $6.20 per share in August 2010.

During 2009 and 2010, the valuation methodologies employed by us in the contemporaneous determination of fair value of our common stock were based on three primary factors: (i) market approach using
comparable publicly traded companies, (ii) income approach using discounted cash flow analysis, and (iii) cost approach. The market approach using publicly traded companies is based on the market value of the invested capital (less cash)
derived from already public companies that are in the biotechnology/pharmaceutical industry and have other characteristics similar to us, including size and business model. The income approach using a discounted cash flow analysis is based on the
residual value and debt-free cash flow from our multi-year forecast discounted to present value based on our calculated weighted average cost of capital, or WACC. The cost approach using estimated cost of replicating or reproducing the development
efforts involved in the development of Sumavel DosePro and ZX002, including applicable selling, general and administrative costs. Each of the above approaches was weighted in the determination of our equity value for each period based on the then
current status of our business model and anticipated liquidity events. Once our equity value was estimated, the option pricing method estimated the value of the common stock by creating a series of call options with exercise prices based on the
liquidation preference of our preferred stock. The estimated value of the common stock was inferred by analyzing these options. In general, after the equity value of the business enterprise was determined, the next step was analyzing any stock
options and warrants outstanding and using the common stock value on a converted basis to see if the options and warrants were in-the-money. Next, the option pricing method was used to allocate the full equity value (inclusive of any cash infusion
from the assumed exercise of in-the-money options and warrants) to our common stock.

In August 2010, we commenced the initial
public offering process. In connection with the preparation of the financial statements necessary for inclusion in the registration statement related to this offering, we reassessed the estimated fair value of our common stock for financial
reporting purposes for each quarter in 2009 and 2010. The reassessment included both the determination of the appropriate valuation models and related inputs. For the reassessed periods prior to 2010, we did not forecast or anticipate a liquidity
event in the near term and, as such, utilized the option pricing method. The option pricing method does not utilize a specific probability of completing an initial public offering but instead utilizes a market approach using comparable publicly
traded companies. These reassessments did not result in any significant difference in the estimated fair value of our common stock from those estimated by our contemporaneous valuations.

As a result of the greater clarity available to us to define likely outcomes and the proximity to a liquidity event (i.e., this offering),
we concluded that the probability weighted expected return method, or PWERM, was more appropriate than our previously used option pricing model and provided a more refined estimate of the likely value of our common stock as of June 30 and
September 30, 2010. The type and timing of each potential liquidity event for the June 30 and September 30, 2010 valuations were heavily influenced by the commencement of the initial public offering process while each prior reassessed
valuation was based on our best estimate of type and timing of liquidity event at that time.

In our application of the PWERM,
our timing and aggregate enterprise value was estimated for various potential liquidity scenarios:



three initial public offering scenarios;



merger and acquisition, or M&A; and



private company.

The enterprise values estimated for these scenarios were based on income and market approaches. Due to our newly launched product and lack of the comparability of revenue multiples within our potential
guideline public companies, we utilized a discounted cash flow analysis to determine our

85

enterprise value in our three initial public offering scenarios. The M&A scenario is based on the value of recently completed M&A activity in our industry. In the stay private scenario we
utilized a less optimistic revenue forecast assuming capital constraints in a private company setting and limiting our ability to launch secondary products. Depending on the value, expected timing and likelihood of a given liquidity scenario, the
models could result in a significant differential between the value of the common stock and preferred stock. In general, there is a greater differential in the value of common stock and preferred stock when a companys enterprise value is not
significantly higher than the aggregate liquidation preferences of its preferred stock.

Once our equity value was estimated
for each scenario, we then allocated a portion of the enterprise value to our common stock based on a best economic outcome model. For the initial public offering scenarios, the value assigned to the common stock was estimated using a
fully diluted outstanding share analysis based on the conversion of all preferred equity instruments into common stock. For M&A and private company scenarios, the model uses a break point analysis to estimate the various enterprise values at
which holders of each series of preferred stock would elect to convert to common stock and the points at which the holders of options and warrants would exercise as a result of the value of the common stock exceeding the exercise price. Each
scenario was assigned a weighting factor based on the probability of occurrence.

The resulting proceeds to the common
stockholders were then discounted to present value using our WACC. In each scenario, we estimated a likely discount for lack of liquidity as a private company and removed this amount from the value available to common stockholders. An at-the-money
put option model was used to determine the discount for lack of liquidity at each valuation date based on the average liquidity date of the various liquidity scenarios. We relied on the Black-Scholes option pricing model framework to estimate the
theoretical value of an at-the-money put option on our common stock which could be exercised in a liquidity event occurring at a future estimated date. The per share value derived from this analysis was then divided by the common share price derived
from the PWERM to estimate the percentage discount that could be inferred using this model.

86

The following tables
summarize the significant assumptions utilized in the PWERM and option pricing models used to determine the reassessed fair value of our common stock as of the dates indicated. In both the PWERM and option pricing models, where discounted cash flow
analyses was used, our revenue forecasts were based on key inputs into statistical algorithms and historical trends rather than the use of year-over-year growth rates. Our key inputs include competitive product launch curves, penetration levels by
type of competitive product (i.e. nasal, melt, tablets and injectables) and market research data such as estimated migraines treated, expected patient and physician acceptance rates and seasonality. These estimates are modified to take into account
our most recent historical sales activity and the experience of our senior management team. From September 2009 to December 2009, our revenue forecasts showed significant improvement due to closer proximity to the commercial launch of Sumavel
DosePro and refinement of underlying assumptions, such as consideration of the new co-promotion agreement with Astellas entered into in the third quarter of 2009. From December 2009 to September 2010, we experienced improvement in our enterprise
value within our initial public offering scenarios, which were weighted at a 70% probability, due to the significant impact on revenues and related discounted cash flows associated with the initiation of our Phase 3 clinical program for ZX002 in the
first quarter of 2010 and the assumed commercial launch in subsequent years. In addition, our re-assessed valuations in 2009 take into consideration the implied value of our common stock based on the sales price of our Series B convertible preferred
stock sold with over 25% participation from new investors. However, these forecasts and projections are subject to numerous estimates, assumptions and uncertainties and were prepared solely for purposes of determining the fair value of our common
stock for accounting purposes and our actual operating results and enterprise value, and ability to commercialize our product candidates may differ materially from those expressed or implied by this data.

September 30, 2009

Key Assumptions

MarketApproach

IncomeApproach

ImpliedValueBased onSeries BFinancing

Weighting

30

%

30

%

40

%

Liquidity date

12/1/2010

N/A

N/A

Present value factor

69

%

Various

100

%

Weighted average cost of capital

N/A

36

%

N/A

Discount for lack of marketability

36

%

36

%

36

%

December 31, 2009

Key Assumptions

MarketApproach

IncomeApproach

ImpliedValueBased onSeries BFinancing

Weighting

30

%

30

%

40

%

Liquidity date

12/1/2010

N/A

N/A

Present value factor

84

%

Various

100

%

Weighted average cost of capital

N/A

37

%

N/A

Discount for lack of marketability

27

%

27

%

27

%

87

Key Assumptions

June 30, 2010

Initial PublicOffering(November 2010)

Initial PublicOffering(December 2010)

Initial PublicOffering(March 2011)

StayPrivate

Merger orAcquisition

Weighting

20

%

35

%

15

%

15

%

15

%

Liquidity date

11/1/2010

12/15/2010

3/31/2011

7/1/2010

10/15/2011

Present value factor

Various

Various

Various

Various

Various

Weighted average cost of capital

30

%

30

%

30

%

36

%

N/A

Discount for lack of marketability

14

%

16

%

20

%

14

%

13

%

Key Assumptions

September 30, 2010

Initial PublicOffering(November 2010)

Initial PublicOffering(December 2010)

Initial PublicOffering(March 2011)

StayPrivate

Merger orSale

Weighting

35

%

20

%

15

%

15

%

15

%

Liquidity date

11/30/2010

12/15/2010

3/31/2011

10/1/2010

10/15/2011

Present value factor

Various

Various

Various

Various

0.99

Weighted average cost of capital

29

%

29

%

29

%

35

%

N/A

Discount for lack of marketability

8

%

9

%

16

%

8

%

3

%

The following is a summary
of the weighted average enterprise values (less debt plus cash) used to determine the reassessed values of our common stock (in millions). However, these enterprise values are based on forecasts and projections and are subject to numerous estimates,
assumptions and uncertainties and were prepared solely for purposes of determining the reassessed values of our common stock for accounting purposes and our actual enterprise value may differ materially from that expressed or implied by this data:

September 30, 2009

$

136

December 31, 2009

$

197

June 30, 2010

$

325

September 30, 2010

$

301

Determining the fair
market value of our common stock involves complex and subjective judgments including estimates of revenue, assumed market growth rates and estimated costs, as well as appropriate discount rates. At the time of each valuation, the significant
estimates used in the discounted cash flow approach included estimates of our revenue and revenue growth rates for several years into the future. Although each time we prepared such forecasts for use in the preparation of a valuation report, we did
so based on assumptions that we believed to be reasonable and appropriate, there can be no assurance that any such estimates for earlier periods or for future periods will prove to be accurate.

88

The following is a
summary of our stock option activity during the year ended December 31, 2009 and the nine months ended September 30, 2010:

Grant Date

Number ofOptionsGranted

ExercisePriceper Share

Fair MarketValue perShare

IntrinsicValue perShare

September 1, 2009

222,000

$

2.50

$

3.20

$

0.70

September 17, 2009

64,500

$

2.50

$

3.20

$

0.70

December 9, 2009

59,500

$

2.50

$

3.60

$

1.10

May 25, 2010

670,050

$

4.00

$

13.50

$

9.50

May 30, 2010

12,250

$

4.00

$

13.50

$

9.50

August 17, 2010

10,500

$

6.20

$

13.00

$

6.80

August 23, 2010

10,000

$

6.20

$

13.00

$

6.80

August 25, 2010

7,500

$

6.20

$

13.00

$

6.80

We
recognized stock-based compensation expense in the statements of operations as follows (in thousands):

Year EndedDecember 31,

Nine MonthsEnded September 30,

2007

2008

2009

2009

2010

Cost of sales

$



$



$



$



$

73

Research and development

45

227

310

228

262

Selling, general and administrative

86

692

716

512

1,377

Total

$

131

$

919

$

1,026

$

740

$

1,712

The total stock-based compensation expense related to unvested stock option grants not yet recognized as of
September 30, 2010 was $9.3 million and the weighted average period over which these grants are expected to vest is 2.93 years.

Based on the assumed initial public offering price of $13.00 per share (the mid-point of the price range set forth on the cover page of this preliminary prospectus), the intrinsic value of stock
options outstanding at September 30, 2010 would have been $14.3 million, of which $4.9 million and $9.4 million would have been related to stock options that were vested and unvested, respectively, at that date.

Our 2006 Equity Incentive Plan, 2010 Equity Incentive Award Plan and 2010 Employee Stock Purchase Plan, are considered compensatory plans
and compensation expense will depend on the level of enrollment in these plans and assumptions used in the determination of the fair market value of the awards at date of grant.

Preferred Stock Warrant Liability

We have estimated the fair
value of all outstanding convertible preferred stock warrants. The warrant obligation is adjusted to fair value at the end of each reporting period. Such fair values were estimated using either the Black-Scholes option-pricing model or a binomial
model depending on the characteristics of the warrants and an estimated term equal to each warrants contractual life, which ranges from seven to 10 years. We will continue to adjust the warrant liability for changes in fair value until the
earlier of the exercise of the warrants or the completion of a liquidation event, including the completion of this offering, at which time the liability will be reclassified to stockholders equity (deficit).

Results of Operations

Comparison of nine months ended September 30, 2010 and 2009

Revenue. Revenue for the nine months ended September 30, 2010 was $14.6 million and zero for the nine months ended September 30, 2009. Revenue for the nine months
ended September 30, 2010

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consists of $11.8 million of product revenue and $2.8 million of contract revenue. Product revenue in the current period consists of Sumavel DosePro dispensed to patients, which is net of
estimated wholesaler and retail pharmacy discounts, stocking allowances, prompt pay discounts, chargebacks, rebates and patient discount programs. We began selling Sumavel DosePro in January 2010 and therefore had no product revenue prior to that
time. Contract revenue represents amortization of license fee payments and milestone payments we received in connection with the co-promotion agreement we entered into with Astellas in July 2009 and which we began recognizing upon the commencement
of sales of Sumavel DosePro.

Cost of Sales. Cost of sales for the nine months ended
September 30, 2010 was $9.4 million and zero for the nine months ended September 30, 2009. Cost of sales for the nine months ended September 30, 2010 represents the cost of Sumavel DosePro units dispensed to patients and the impact of
excess capacity caused by production underruns and other manufacturing variances. We began selling Sumavel DosePro in January 2010 and therefore had no cost of sales prior to that time. Prior to regulatory approval of Sumavel DosePro, costs of
prototypes, testing and process refinement were charged to research and development. Beginning in the second half of 2009, we began capitalizing manufacturing cost of inventories.

Royalty Expense. Royalty expense was $0.6 million for the nine months ended September 30, 2010 and zero
for the nine months ended September 30, 2009. Royalty expense for the nine months ended September 30, 2010 represents the amortization of a $4.0 million milestone payment we made in connection with the asset purchase agreement with Aradigm
payable on the first commercial sale of Sumavel DosePro, which occurred in January 2010, as well as royalties payable to Aradigm from net sales of Sumavel DosePro during the period.

Research and Development Expenses. Research and development expenses decreased to $19.4 million for the nine
months ended September 30, 2010 compared to $22.3 million for the nine months ended September 30, 2009. This decrease of $2.9 million primarily was due to:



a decrease of $17.5 million due to the capitalization of third-party direct labor, materials and internal overhead costs related to the manufacturing
of Sumavel DosePro commercial product, inclusive of related salaries and personnel costs, subsequent to the FDA approval of Sumavel DosePro in July 2009. Prior to FDA approval, these costs were recognized as research and development expenses; offset
by



an increase of $14.6 million in research and development costs primarily as a result of the initiation of our Phase 3 clinical trials for ZX002 and a
Phase 4 clinical trial for Sumavel DosePro which was initiated in late 2009.

Selling, General and
Administrative Expenses. Selling, general and administrative expenses increased to $36.8 million for the nine months ended September 30, 2010 compared to $8.0 million for the nine months ended September 30, 2009.
Selling expenses were $30.6 million for the nine months ended September 30, 2010 compared to $3.1 million for the nine months ended September 30, 2009. General and administrative expenses were $6.2 million for the nine months ended
September 30, 2010 compared to $4.9 million for the nine months ended September 30, 2009. The increase of $28.8 million in selling, general and administrative expenses primarily was due to:



an increase of $27.5 million in sales and marketing expense as a result of the expansion of our commercial infrastructure, which included the hiring of
approximately 80 sales representatives, and the commercial launch of Sumavel DosePro; and



an increase of $1.3 million of general and administrative expenses due to an increase in salaries and related benefits.

Interest Income. Interest income decreased to $4,000 for the nine months ended September 30, 2010
compared to $7,000 for the nine months ended September 30, 2009. This decrease of $3,000 was due primarily to the decrease in average cash and investment balances.

90

Interest
Expense. Interest expense decreased to $6.9 million for the nine months ended September 30, 2010 compared to $8.6 million for the nine months ended September 30, 2009. This decrease of $1.7 million was primarily
due to:



a decrease of $3.0 million in debt discount costs in connection with the $14.8 million borrowed under the 2009 Notes. These notes were converted in
September 2009, and the amortization of the related discount was accelerated.



an increase of $0.3 million in interest expense in connection with (1) the early settlement of our outstanding principal balance on our $18.0 million
loan and security agreement with Oxford and CIT entered into in June 2008 and amended in July and October 2010 and (2) the 2010 Notes; and



an increase of $1.0 million in the amortization of debt issuance and debt discount costs in connection with (1) the $18.0 million loan and security
agreement with Oxford and CIT entered into in June 2008 and amended in July and October 2010 and (2) the 2010 Notes.

Change in Fair Value of Warrant Liability. Change in the fair value of warrant liability increased by $12.3 million to $12.8 million in expense for the nine months ended
September 30, 2010 compared to $0.5 million in expense for the nine months ended September 30, 2009 due to the increase in fair value of the Series A-1, Series A-2 and Series B convertible preferred stock. This increase in the fair value of the
warrants is primarily the result of the recognition of the value of the warrants to purchase Series B convertible preferred stock.

Other Income (Expense). Other income (expense) decreased to $0.1 million of expense for the nine months ended September 30, 2010 compared to $0.4 million of expense for
the nine months ended September 30, 2009. This decrease was due to foreign currency transaction gains which primarily related to the settlement of our liabilities payable in Euro and U.K. pounds sterling.

Comparison of year ended December 31, 2009 and 2008

Research and Development Expenses. Research and development expenses decreased to $21.4 million for the year ended December 31, 2009 compared to $33.9 million for the
year ended December 31, 2008. This decrease of $12.5 million primarily was due to:



a decrease of approximately $13.2 million due to the capitalization of third-party direct labor, materials and internal overhead costs related to the
manufacturing of Sumavel DosePro commercial product, inclusive of related salaries and personnel costs;



a decrease of approximately $2.0 million in expenses associated with consulting services, $0.4 million in travel-related expenses, and $0.4 million of
salaries and personnel related costs;



a decrease of $1.6 million for ZX002 clinical trial expenses, as the Phase 3 clinical trials for this program were temporarily delayed, and a $0.2
million reduction in clinical trial expenses for Sumavel DosePro; and



an increase of $5.3 million in manufacturing costs related to services and supplies in the testing and manufacturing development of Sumavel DosePro
prior to the production of commercial inventories.

Selling, General and Administrative
Expenses. Selling, general and administrative expenses increased to $14.1 million for the year ended December 31, 2009 compared to $11.8 million for the year ended December 31, 2008. This increase of $2.3 million
primarily was due to:



an increase of $2.7 million in salaries and personnel costs as we expanded our commercial and administrative infrastructure, including the hiring of
approximately 20 sales representatives, in preparation for the January 2010 commercial launch of Sumavel DosePro, $0.2 million in travel related expenses and $0.2 million in facilities costs; offset by



a decrease of $0.8 million of expenses associated with consulting and professional services.

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Interest
Income. Interest income decreased to $10,000 for the year ended December 31, 2009 compared to $696,000 for the year ended December 31, 2008. This decrease of $686,000 was due primarily to the decrease in average
cash and investment balances as a result of investing the proceeds received from our Series B preferred stock financing and Astellas in lower yielding instruments.

Interest Expense. Interest expense increased to $9.2 million for the year ended December 31, 2009 compared to $1.7 million for the year ended December 31, 2008.
This increase of $7.5 million was primarily due to:



an increase of $1.0 million in the amortization of debt issuance, debt discount costs and interest expense in connection with the loan and security
agreement with GE Capital entered into in March 2007 and the $18.0 million loan and security agreement with Oxford and CIT entered into in June 2008;



an increase of $3.5 million in interest and the amortization of debt discount costs in connection with the $14.8 million borrowed under the 2009 Notes;
and



recognition of $3.0 million in fair value of the right to convert the outstanding principal and interest under the 2009 Notes to convertible preferred
stock.

Change in Fair Value of Warrant Liability. Change in the fair value of
warrant liability decreased by $1.9 million to $0.8 million in expense for the year ended December 31, 2009 compared to $1.1 million in income for the year ending December 31, 2008 due to the increase in fair value of the Series A-1, Series A-2 and
Series B convertible preferred stock.

Other Income (Expense). Other expense was $0.4 million for
the year ended December 31, 2009 compared to other income of $0.1 million for the year ended December 31, 2008. This $0.5 million increase in expense was due to foreign currency transaction losses which primarily related to the settlement
of our liabilities payable in Euro and U.K. pounds sterling.

Comparison of year ended December 31, 2008 and 2007

Research and Development Expenses. Research and development expenses increased to $33.9
million for the year ended December 31, 2008 compared to $24.3 million for the year ended December 31, 2007. This increase of $9.6 million primarily was due to:



an increase of approximately $8.7 million resulting from manufacturing costs related to services and supplies in the testing and manufacturing
development of Sumavel DosePro, inclusive of related salaries, personnel costs and travel; and



an increase of approximately $0.9 million in expenses associated with consulting services, clinical supplies and costs incurred in preparation for the
Phase 3 clinical trials of ZX002, including related salaries and personnel costs.

Selling, General and
Administrative Expenses. Selling, general and administrative expenses increased to $11.8 million for the year ended December 31, 2008 compared to $4.7 million for the year ended December 31, 2007. This increase
of $7.1 million primarily was due to:



an increase of $4.0 million in market research, branding and sales and marketing personnel costs; and



an increase of $1.7 million of expenses associated with professional fees for legal, consulting and accounting services from the initiation in 2008 of
our registration process with the SEC for a proposed initial public offering and an increase of $1.4 million of facilities cost and expenses associated with administrative salaries and related personnel costs.

Interest Income. Interest income decreased to $0.7 million for the year ended December 31, 2008
compared to $0.9 million for the year ended December 31, 2007. This decrease of $0.2 million was due primarily to the decrease in average cash and investment balances as a result of the use of cash for operating purposes.

92

Interest
Expense. Interest expense increased to $1.7 million for the year ended December 31, 2008 compared to $0.4 million for the year ended December 31, 2007. This increase of $1.3 million was primarily due to an
increase of $1.3 million in interest and amortization of debt issuance and debt discount costs in connection with the loan and security agreements with GE Capital and Oxford /CIT and interest on additional borrowings.

Change in Fair Value of Warrant Liability. Change in the fair value of warrant liability increased by $1.2
million to $1.1 million in income for the year ended December 31, 2008 compared to $0.1 million in expense for the year ending December 31, 2007 due to the decrease in fair value of the Series A-1 and Series A-2 convertible preferred stock.

Other Financing Income. Other financing income decreased to zero for the year ended
December 31, 2008 compared to $0.9 million for the year ended December 31, 2007. The amount recognized in 2007 relates to the change in the estimated fair value of our investors right to purchase additional shares of Series A-1
convertible preferred stock.

Other Income. Other income increased to $63,000 for the year ended
December 31, 2008 compared to $25,000 for the year ended December 31, 2007. This net increase of $38,000 was due to foreign currency transaction gains which primarily related to the settlement of our liabilities payable in Euro and U.K.
pounds sterling.

Liquidity and Capital Resources

We have experienced net losses and negative cash flow from operations since inception, and as of September 30, 2010, had an
accumulated deficit of $196.0 million, and expect to continue to incur net losses and negative cash flow from operations for at least the next several years primarily as a result of, among other things, the development expenses in connection with
our clinical trials and pre-clinical studies for ZX002 and the cost of the sales and marketing expenses associated with Sumavel DosePro.

In its report accompanying our audited financial statements for the year ended December 31, 2009, included elsewhere in this prospectus, our independent registered public accounting firm included an
explanatory paragraph stating that our recurring losses from operations and lack of sufficient working capital raise substantial doubt as to our ability to continue as a going concern. A going concern opinion means, in general, that our
independent registered public accounting firm has substantial doubt about our ability to continue our operations without continuing infusions of capital from external sources and could impair our ability to finance our operations through the sale of
debt or equity securities or commercial bank loans. Our ability to continue as a going concern will depend, in large part, on our ability to generate positive cash flow from operations and obtain additional financing, if necessary, neither of which
is certain, as well as the continued availability of borrowings under our amended Oxford loan agreement. If we are unable to achieve these goals, our business would be jeopardized and we may not be able to continue operations and may have to
liquidate our assets and may receive less than the value at which those assets are carried on our financial statements, and it is likely that investors will lose all or a part of their investment.

Since inception, our operations have been financed primarily through equity and debt financings, the issuance of convertible notes and
payments received from Astellas under our co-promotion agreement. Through December 31, 2009, we received aggregate net cash proceeds of approximately $148.3 million from the sale of shares of our preferred and common stock as follows:



from August 25, 2006 (inception) to December 31, 2009, we issued and sold a total of 1,444,468 shares of common stock for aggregate net cash
proceeds of $0.2 million;



in August 2006, we issued and sold a total of 30,775,000 shares of Series A-1 convertible preferred stock for aggregate net cash proceeds of $30.5
million;



in September 2007 and December 2007, we issued and sold an additional 38,025,000 shares of Series A-1 convertible preferred stock for aggregate net
cash proceeds of $38.0 million; in

93

December 2007, we issued and sold a total of 9,090,909 shares of Series A-2 convertible preferred stock for aggregate net cash proceeds of $9.9 million;



in September 2009, we issued and sold 32,689,062 shares of Series B convertible preferred stock for aggregate net cash proceeds of $34.8 million
(inclusive of $14.8 million of outstanding principal of convertible notes held by certain investors that we issued earlier in 2009 and that were converted into Series B convertible preferred stock in connection with the financing) and warrants to
purchase up to 3,363,619 shares of Series B convertible preferred stock ; and



in December 2009, we issued and sold an additional 31,818,171 shares of Series B convertible preferred stock and warrants to purchase up to 9,545,447
shares of Series B convertible preferred stock for aggregate net cash proceeds of $34.9 million.

In March
2007, we entered into a loan and security agreement with GE Capital for the purpose of financing our capital equipment costs. Under the agreement, we were allowed to borrow up to $10.0 million based on purchases of property and equipment at a
fixed interest rate determined at the time of borrowing. Pursuant to the loan and security agreement, we borrowed approximately $4.5 million under two promissory notes during the year ended December 31, 2007. Monthly payments of principal
and interest are required to be made over a 48 month period beginning on the date of the advance. The outstanding balance is collateralized by specific manufacturing equipment owned by us. There are no financial covenants in connection with the loan
and security agreement. The loan and security agreement permits the lender to demand the immediate repayment of all borrowings and other amounts thereunder if, among other customary events of default, the lender determines, in its sole discretion,
that a material adverse change with respect to us has occurred. As of September 30, 2010, there are no further amounts available under this credit facility as our ability to borrow additional amounts expired on December 21, 2007. As of
September 30, 2010, $1.0 million in aggregate principal amount of borrowings were outstanding under the GE Capital agreement, which we are required to repay, together with accrued interest, in monthly installments ending on January 1,
2012. We have the option to repay outstanding borrowings under the GE Capital agreement, subject to prepayment fees.

In June
2008, we entered into an $18.0 million loan and security agreement with Oxford and CIT for the purpose of financing our operating expenses, which agreement was amended and restated in July and October 2010 as described below. The borrowings under
the Oxford and CIT agreement bore an interest rate of 9.76%. Payments consisted of interest-only payments for the first 10 months followed by principal and interest payments for the subsequent 36 months. The agreement required a final payment of
$1.0 million, in addition to principal repayments, at final maturity, which was May 1, 2012. As described below, we amended and restated this loan and security agreement in July and October 2010.

In July 2009, we entered into the co-promotion agreement with Astellas. In connection with this co-promotion agreement, Astellas made a
non-refundable up-front payment to us of $2.0 million and agreed to make an additional $18.0 million of payments to us upon the achievement of a series of milestones. As of December 31, 2009, we received a total of $19.0 million from Astellas.
The remaining $1.0 million was paid to us in March 2010.

In July and October 2010, we amended and restated the loan and
security agreement with Oxford and CIT, and Oxford and SVB are now party to the amended Oxford loan agreement. The amended Oxford loan agreement consists of a $25.0 million term loan and a $10.0 million revolving credit facility. The obligations
under the amended Oxford loan agreement are collateralized by our personal property (including, among other things, accounts receivable, equipment, inventory, contract rights, rights to payment of money, license agreements, general intangibles and
cash) but excluding, among other things, copyrights, patents, patent applications, trademarks, service marks, trade secret rights and equipment pledged to secure the GE loan facility described above.

The amended Oxford loan agreement includes financial covenants requiring that (1) we achieve, as of the last day of each month
measured on a trailing three-month basis, actual revenue of at least a specified percentage of our projected revenue as provided to Oxford and SVB in the event we fail to

94

maintain a liquidity ratio (defined, in general, as the ratio of (a) cash and cash equivalents deposited with Silicon Valley Bank plus unused borrowing capacity under that agreement to (b) all
debt, capital lease obligations and contingent obligations owed to the lenders) of 1.25 to 1.00 and (2) we complete an equity or subordinated debt financing of at least $10.0 million prior to November 30, 2010. The agreement also includes
a covenant that the audit report accompanying our year-end financial statements for fiscal year 2010 and thereafter not include a going concern qualification. As discussed under Risk FactorsOur independent registered public
accounting firm has expressed substantial doubt as to our ability to continue as a going concern, the audit report accompanying our 2009 financial statements includes a going concern qualification and, as a result, our results of operations
and financial condition will have to improve to a point where our auditors can deliver their audit report without this qualification in order to avoid a breach of this covenant. In addition, the amended Oxford loan agreement prohibits us from
(1) incurring any debt other than, among other things, debt under the amended Oxford loan agreement or under the GE Capital agreement, subordinated debt and purchase money debt and refinancings of that permitted debt, (2) entering into
sale and leaseback transactions and (3) entering into mergers with, or acquisitions of all or substantially all the assets of, another entity with a value in excess of $100,000, and also prohibits the occurrence of a change in control of our
company. Under the amended Oxford loan agreement, a change in control will be deemed to occur if, among other things, our stockholders prior to this offering cease to hold (a) at least 60% of our capital stock or (b) capital stock having
a majority of the ordinary voting power in the election of our directors. The amended Oxford loan agreement also prohibits a change in our management such that our Chief Executive Officer, Chief Financial Officer or President resigns, is terminated
or is no longer actively involved in our management in his or her current position and is not replaced with a person acceptable to our board of directors within 120 days.

The $25.0 million term loan bears an interest rate of 12.06% per annum. Payments consist of monthly interest only payments for the first 12 months followed by principal and interest payments for the
subsequent 30 months. The term loan requires a final payment of $1.2 million, in addition to the repayment of unpaid principal, at the loan maturity date, which is January 1, 2014. We have the option to prepay the outstanding balance of the
term loan in full subject to a prepayment fee of either 2% or 3% of the principal amount being prepaid depending upon when the prepayment occurs as well as the $1.2 million final payment. Under the terms of the revolving credit facility, we may
borrow up to $10.0 million, but not more than a specified percentage of our eligible accounts receivable and inventory balances (as defined in the agreement). Amounts outstanding under the revolving credit facility accrue interest payable monthly at
a floating rate per annum equal to the greater of 3.29% above SVBs prime rate or 7.29%. In addition, we pay a monthly fee equal to 0.5% per annum of the average unused portion of the revolving credit facility. If the revolving credit
facility is terminated, a final payment is required in the amount of $0.1 million, $0.2 million or $0.3 million depending upon when the termination occurs. The amended Oxford loan agreement matures on the earliest of January 1, 2014, the
occurrence of an event of default resulting in our obligations becoming due and payable in accordance with the amended Oxford loan agreement or the date of any prepayment of all outstanding obligations under the amended Oxford loan agreement, at
which time a final payment of $0.1 million, plus all unpaid principal, must be paid in full. In connection with the execution of the amended Oxford loan agreement, we repaid the outstanding balance of the Oxford and CIT loan and security agreement
totaling $12.8 million at June 30, 2010, which amount was repaid with borrowings under the amended loan and security agreement. Consequently, the net proceeds we received upon the execution of the amended Oxford loan agreement totaled $12.2
million. As of September 30, 2010, we had borrowed $2.7 million under the revolving credit facility.

We depend in part
upon borrowings available under the revolving credit facility provided under the amended Oxford loan agreement to finance our ongoing operations. Accordingly, any termination of that revolving credit facility, or any requirement that we repay any of
our outstanding term loans, whether as the result of our default under the applicable agreement or otherwise, could have a material adverse effect on our business, results of operations and financial condition.

95

Concurrently with and
as required by the amended Oxford loan agreement, we entered into a note purchase agreement with certain existing investors pursuant to which we borrowed an aggregate of $15.0 million. We issued convertible promissory notes, or the 2010 Notes, for
the amount borrowed which accrue interest at a rate of 8.00% per annum and become due and payable in July 2011. The principal amount of the 2010 Notes and accrued interest thereon will automatically convert into shares of our common stock upon
completion of this offering at a conversion price equal to the initial public offering price per share of our common stock. If a deemed liquidation event (as defined in our certificate of incorporation) occurs prior to the completion of this
offering, the holders of the 2010 Notes may elect to (1) receive the repayment of the notes or (2) convert the notes into shares of Series B convertible preferred stock at a conversion rate of $1.10 per share.

Cash and Cash Equivalents. Cash and cash equivalents totaled $11.7 million and $44.9 million at
September 30, 2010 and December 31, 2009, respectively.

The following table summarizes our cash flows from (used in)
operating, investing and financing activities for the years ended December 31, 2007, 2008 and 2009 and the nine months ended September 30, 2009 and 2010:

Year Ended December 31,

Nine Months EndedSeptember 30,

2007

2008

2009

2009

2010

(In Thousands)

Statement of Cash Flows Data:

Total cash provided by (used in):

Operating activities

$

(26,800

)

$

(41,288

)

$

(32,361

)

$

(20,071

)

$

(58,492

)

Investing activities

1,005

(2,793

)

(2,057

)

(1,203

)

(2,084

)

Financing activities

51,972

16,798

65,104

31,833

27,338

Increase (decrease) in cash and cash equivalents

$

26,177

$

(27,283

)

$

30,686

$

10,559

$

(33,238

)

Operating Activities. Net cash used in operating activities was $58.5 million
and $20.1 million for the nine months ended September 30, 2010 and 2009, respectively. Net cash used for the nine months ended September 30, 2010 primarily reflects the use of $51.7 million for operations (excluding non-cash items), payment of
a $4.0 million milestone obligation to Aradigm as a result of the first commercial sale of Sumavel DosePro, and investments of $4.8 million in commercial inventory of Sumavel DosePro, partially offset by $2.0 million provided by other working
capital sources. Net cash used for the nine months ended September 30, 2009 primarily reflects expenditures related to testing and manufacturing development of Sumavel DosePro, personnel-related costs, third-party supplier expenses and professional
fees.

Net cash used in operating activities was $32.4 million and $41.3 million for the years ended December 31, 2009 and
2008, respectively. Net cash used in 2009 primarily reflects the use of $33.3 million for operations, an investment of $15.7 million in commercial inventory of Sumavel DosePro and $2.4 million in other working capital requirements, offset by $19.0
million of proceeds provided by our co-promotion partner, Astellas, for Sumavel DosePro. Net cash used in 2008 primarily reflects expenditures related to external research and product development, clinical trial costs, personnel-related costs,
third-party supplier expenses and professional fees. Net cash of $26.8 million used in operating activities in 2007 primarily reflects expenditures related to external research and product development, clinical trial costs, personnel-related costs,
third-party supplier expenses and professional fees.

Investing Activities. Net cash used in
investing activities was $2.1 million and $1.2 million for the nine months ended September 30, 2010 and 2009, respectively. These amounts are the result of the purchase of property and equipment primarily for use in manufacturing Sumavel
DosePro.

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Net cash used in investing activities was $2.1 million and $2.8 million for the years ended
December 31, 2009 and 2008, respectively. These amounts are the result of the purchase of property and equipment and in 2008 inclusive of the net purchases, sales and maturities of investment securities. Net cash provided by investing
activities of $1.0 million in 2007 primarily relates to proceeds from sales and maturities of investment securities, net of purchases of investment securities and property and equipment.

We incurred capital expenditures of $2.1 million during the nine months ended September 30, 2010 and expect to incur approximately $1.0
million to $1.2 million during the fourth quarter of 2010. These capital expenditures primarily relate to further investments in our manufacturing operations toward increasing production capacity.

Financing Activities. Net cash provided by financing activities was $27.3 million for the nine months ended
September 30, 2010 compared to net cash provided by financing activities of $31.8 million for the nine months ended September 30, 2009. Net cash provided by financing activities for the nine months ended September 30, 2010 relates to
$27.7 million in proceeds received in connection with the amended Oxford loan agreement, $15.0 million in proceeds received in connection with the 2010 Notes, offset by principal repayments made of $15.4 million on our outstanding debt facilities.
Net cash provided by financing activities for the nine months ended September 30, 2009 relates to $14.8 million in proceeds received in connection with the 2009 Notes and $20.0 million in net proceeds received in connection with the initial closing
of our Series B convertible preferred stock financing offset by $3.0 million in principal repayments on our outstanding debt facilities.

Net cash provided by financing activities was $65.1 million and $16.8 million for the years ended December 31, 2009 and 2008, respectively. In 2009 we received net proceeds of $69.7 million from our
Series B convertible preferred stock financing, inclusive of $14.8 million of proceeds from the issuance of convertible promissory notes between February and July 2009 that converted into Series B convertible preferred stock, and made principal
repayments on our outstanding debt facilities totaling $4.7 million. In 2008, we received net proceeds of $17.8 million from the Oxford and CIT loan and security agreement and made principal repayments on our outstanding debt facilities totaling
$1.0 million. Net cash provided by financing activities was $52.0 million for 2007. In 2007, we received net proceeds of $47.9 million from the issuance of Series A convertible preferred shares and $4.4 million from the GE Capital debt facility net
of $0.5 million of proceeds used for principal repayments on our outstanding debt facilities.

Future Financing
Activities. We cannot be certain if or when we will generate sufficient cash flows from sales of Sumavel DosePro to finance our operating expenses, nor can we predict the amount of cash that may be necessary for clinical
trials and pre-clinical studies of ZX002 or any of our other product candidates. Likewise, we expect to make additional investments in equipment and other production capacity to manufacture sufficient quantities of Sumavel DosePro. In addition, if
we or Astellas are not successful in the promotion of Sumavel DosePro we may require additional financing resources to finance our operations and meet our promotion and inventory commitments under our co-promotion arrangement.

As described above, under our amended Oxford loan agreement, we are subject to financial covenants that require us to achieve certain
revenue targets in the event we fail to maintain a liquidity ratio (defined, in general, as the ratio of (a) cash and cash equivalents deposited with Silicon Valley Bank plus unused borrowing capacity under that agreement to (b) all debt, capital
lease obligations and contingent obligations owed to the lenders) of 1.25 to 1.00 and generate $10.0 million of proceeds through additional equity or subordinated debt financing by November 30, 2010, and we are also subject to other covenants
and obligations under that agreement. Likewise, both the amended Oxford loan agreement and our GE Capital loan agreement permit the lenders to demand immediate repayment of all borrowings upon the occurrence of specified events of default. If we
fail to pay amounts owing under either of these loan agreements when due, if we breach our other covenants or obligations under either of these agreements, or if other events of default under either of these credit agreements

97

occur, the applicable lenders would be entitled to demand immediate repayment of all borrowings and other obligations thereunder and to seize and sell the collateral pledged as security under
that agreement to satisfy those obligations. If we were to breach our covenants and obligations and we were unable to obtain a waiver or amendment from the lender, we would be required to seek additional equity or debt financing to refinance our
obligations under the agreement. Additional debt or equity financing may not be available to us in amounts or on terms we consider acceptable, or at all. In that regard, we have from time to time been required to obtain waivers and amendments under
our debt instruments in order to avoid breaches or other defaults. For example, in both 2009 and 2010 we were required to obtain amendments or waivers under our credit facilities.

We cannot be certain if, when and to what extent we will generate positive cash flow from operations from the commercialization of our
product and, if approved, product candidates. We expect our development and commercialization expenses to be substantial and to increase over the next few years as we continue to grow the Sumavel DosePro brand and continue to advance our ZX002
product through Phase 3 clinical trials.

To the extent that funds generated by this offering, together with existing cash and
cash equivalents, net revenue, and borrowings available under our $10.0 million revolving credit facility, are insufficient to fund our future activities, capital expenditures and other cash needs, we will need to raise additional funds through
public or private equity or debt financings. Although we are currently not a party to any agreement or letter of intent with respect to potential investments in, or acquisitions of, businesses, services or technologies, we may enter into these types
of arrangements in the future, which could also require us to seek additional equity or debt financing. There can be no assurance that we will be able to raise additional funds from any of these sources on terms we deem acceptable, or at all. In
addition, future issuance of equity, convertible or other equity-linked securities could materially dilute the ownership interests of holders of our common stock and additional debt financing could result in a material increase in the amount of cash
necessary to fund debt service payments and also could require that we comply with financial and other covenants that limit our flexibility and operations. In addition, the fact that we have pledged substantially all of our assets to secure our
existing loan facilities will likely increase the cost, perhaps substantially, of any additional debt financing we may obtain or prevent us from obtaining additional debt financing altogether. Although it is difficult to predict future liquidity
requirements, we believe that the net proceeds from this offering, together with our existing cash and cash equivalents, future product revenues and borrowings available under our $10.0 million revolving credit facility, will be sufficient to fund
our operations for at least the next 12 months.

Contractual Obligations and Commitments

The following table describes our long-term contractual obligations and commitments as of December 31, 2009:

Payments Due by Period

Total

Less than1
Year

1-3 Years

3-5 Years

More than5 Years

(In Thousands)

Debt obligations(1)

$

16,366

$

7,041

$

9,325

$



$



Debt interest(2)

2,918

1,291

1,627





Operating lease obligations(3)

5,675

1,463

2,620

1,178

414

Co-Promotion marketing & promotional expenses(4)

5,502

5,502







Purchase obligations(5)

26,664

9,933

11,577

5,154



Total

$

57,125

$

25,230

$

25,149

$

6,332

$

414

(1)

Represents principal payments due in each period on our loan and security agreement with GE Capital and our loan and security agreement with Oxford Finance Corporation
and CIT Healthcare LLC.

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(2)

Includes the interest on regular scheduled debt payments to GE Capital at an annual rate of 10.08% on the initial borrowing of $3.5 million made in March 2007 and at an
annual rate of 9.91% on the second borrowing of $1.0 million made in December 2007. Also includes the interest on regular scheduled debt payments to Oxford Finance Corporation and CIT Healthcare LLC at an annual rate of 9.76%.

(3)

Includes the minimum rental payments for our San Diego, California office pursuant to a lease entered into in October 2009 and expiring, as extended, in July 2011,
which office houses our general and administrative, sales and marketing operations. Also includes the minimum rental payments for our Emeryville, California office pursuant to a lease entered into in July 2007 and expiring, as extended, in September
2015, which office houses our supply chain and inventory management and research and development operations. The rent for our Emeryville facility includes a 3.0% annual increase for the duration of the lease. Also includes the rental payments for a
fleet of up to 95 vehicles pursuant to a lease entered into in August 2009. Each vehicle has a lease term of 36 months.

(4)

Represents our portion of the shared marketing and promotional costs as agreed between us and Astellas for 2010 joint promotional efforts for Sumavel DosePro. These
obligations are determined on an annual basis through the term of the agreement.

Under our co-promotion agreement with Astellas, we are
required to pay Astellas a service fee on a quarterly basis that represents a fixed percentage of between 45% and 55% of Sumavel DosePro net sales to the Astellas Segment. Under our asset purchase agreement with Aradigm, we are required to pay a 3%
royalty on global net sales of Sumavel DosePro by us or one of our licensees and, in the event that we or one of our future licensees, if any, commercializes a non-sumatriptan product in the DosePro delivery system, we are required to pay
Aradigm, at our election, either a 3% royalty on net sales of each non-sumatriptan product commercialized or a fixed low-twenties percentage of royalty revenue received by us from the licensee. In addition, under our license agreement with
Elan we may be required to pay up to $4.5 million in total future milestone payments with respect to ZX002 depending upon the achievement of various development and regulatory events and, if ZX002 is approved, to pay a mid single-digit percentage
royalty on its net sales for a specified period of time and continue to pay royalties on net sales of the product thereafter at a reduced low single-digit percentage rate in accordance with the terms of the license agreement. We also maintain
agreements with third parties to manufacture our product, conduct our clinical trials and perform data collection and analysis. Our payment obligations under these agreements will likely depend upon the progress of our development programs and
commercialization efforts. Therefore, we are unable at this time to estimate with certainty the future costs we will incur under these agreements.

Recent Accounting Pronouncements

Effective July 1, 2009, the
Financial Accounting Standards Board, or the FASB, Accounting Standards Codification, or ASC or Codification, became the authoritative source of GAAP. All existing FASB accounting standards and guidance were superseded by the ASC. Instead of issuing
new accounting standards in the form of statements, staff positions and Emerging Issues Task Force abstracts, the FASB now issues Accounting Standards Updates that update the Codification. Rules and interpretive releases of the SEC under authority
of federal securities laws continue to be additional sources of authoritative GAAP for SEC registrants.

In August 2009, the
FASB ratified a new accounting standard for the fair value measurement of liabilities when a quoted price in an active market is not available. The new guidance is effective for reporting periods beginning after August 28, 2009, which means
that it became effective for the fourth

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quarter beginning October 1, 2009. We adopted this guidance in relation to our existing warrants for convertible preferred stock as more fully described in Note 2 to our financial statements
(Fair Value) appearing elsewhere in this prospectus.

In January 2010, the FASB issued a new accounting standard which amends
guidance on fair value measurements and disclosures. The new guidance requires disclosure of transfers into and out of Level 1 and Level 2 fair value measurements, and also requires more detailed disclosure about the activity within Level 3 fair
value measurements. This standard is effective for annual and interim reporting periods beginning after December 15, 2009, except for the requirements related to Level 3 disclosures, which are effective for annual and interim reporting periods
beginning after December 15, 2010. We adopted the relevant provisions of this guidance, and the adoption did not have a material impact on our financial statements.

In February 2010, the FASB issued a new accounting standard which amends guidance on subsequent events. The new guidance requires evaluation of subsequent events through the date the financial statements
are issued for SEC filers, amends the definition of SEC filer, and changes required disclosures. This standard is effective on February 24, 2010 and did not have a material impact on our financial statements upon adoption.

In March 2010, the FASB Emerging Issues Task Force, or EITF, ratified a new accounting standard which amends guidance on the milestone
method of revenue recognition. The EITF concluded that the milestone method is a valid application of the proportional performance model when applied to research or development arrangements. This guidance eliminates the requirement to establish the
fair value of undelivered products and services and instead provides for separate revenue recognition based upon managements estimate of the selling price for an undelivered item when there is no other means to determine the fair value of that
undelivered item. This standard allows an entity to make an accounting policy election to recognize a payment that is contingent upon the achievement of a substantive milestone in its entirety in the period in which the milestone is achieved. This
standard is effective for fiscal years beginning on or after June 15, 2010 with early adoption permitted. The guidance may be applied prospectively for milestones achieved after the adoption date or retrospectively for all periods presented. We
do not expect this guidance to have a material impact on our financial position, results of operations or cash flows.

Off-Balance Sheet Arrangements

We have not engaged in any off-balance sheet activities.

Quantitative and
Qualitative Disclosures About Market Risk

Interest Rate Risk

Our cash and cash equivalents as of September 30, 2010 consisted primarily of cash and money market funds. Our primary exposure to
market risk is interest income sensitivity, which is affected by changes in the general level of U.S. interest rates. The primary objective of our investment activities is to preserve principal while at the same time maximizing the income we receive
without significantly increasing risk. Instruments that meet this objective include commercial paper, money market funds and government and non-government debt securities. Some of the investment securities available-for-sale that we invest in may be
subject to market risk. This means that a change in prevailing interest rates may cause the value of the investment securities available-for-sale to fluctuate. To minimize this risk, we intend to continue to maintain our portfolio of cash and money
market funds. Due to the short-term nature of our investments and our ability to hold them to maturity, we believe that there is no material exposure to interest rate risk.

Our $10.0 million revolving credit facility with Oxford and SVB bears interest at the greater of 3.29% above SVBs prime rate or 7.29%. As of September 30, 2010, we had $2.7 million outstanding on
this revolving credit facility.

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Foreign Exchange Risk

All of the revenues we have generated to date have been paid in U.S. dollars and we expect that our revenues will
continue to be generated primarily in U.S. dollars for at least the next several years. Payments to our material suppliers and contract manufactures are denominated in the Euro and U.K. pounds sterling, thereby increasing our exposure to exchange
rate gains and losses on non-U.S. currency transactions. Foreign currency gains and losses associated with these expenditures have not been significant to date. However, fluctuations in the rate of exchange between the U.S. dollar and these or other
foreign currencies could adversely affect our financial results in the future, particularly to the extent we increase production to support Sumavel DosePro sales demands. For the nine months ended September 30, 2010, approximately $25.4 million
(based on exchange rates as of September 30, 2010) of our materials and contract manufacturing costs were denominated in foreign currencies. We do not currently hedge our foreign currency exchange rate risk. We intend to evaluate various options to
mitigate the risk of financial exposure from transacting in foreign currencies in the future.

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BUSINESS

Overview

We are a pharmaceutical company commercializing and developing
products for the treatment of central nervous system disorders and pain. Our first commercial product, Sumavel DosePro (sumatriptan injection) Needle-free Delivery System, was launched in January 2010. Sumavel DosePro offers
fast-acting, easy-to-use, needle-free subcutaneous administration of sumatriptan for the acute treatment of migraine and cluster headache in a pre-filled, single-use delivery system. Sumavel DosePro is the first drug product approved by the
U.S. Food and Drug Administration, or FDA, that allows for the needle-free, subcutaneous delivery of medication. Sumavel DosePro may offer a faster-acting and more efficacious treatment alternative to oral and nasal triptans and simple, convenient
administration when compared to traditional, needle-based sumatriptan injection. As a result, we believe that Sumavel DosePro has the potential to be prescribed by a broad physician audience, especially for difficult to treat migraine
episodes.

Migraine is a syndrome that affects approximately 30 million people in the United States,
according to a 2010 National Headache Foundation, or NHF, press release. Triptans are the class of drugs most often prescribed for treating migraines. In the United States in the 12 months ended June 2010, triptans generated sales of approximately
$3.45 billion and sumatriptan, including branded and generic forms, represented the biggest market share of the seven approved triptans, with sales of approximately $1.97 billion, according to Wolters Kluwer Pharma Solutions (Source® PHAST Institution/Retail).

We launched the commercial sale of Sumavel DosePro in the United States in January 2010 with our co-promotion partner, Astellas Pharma US, Inc., or Astellas. Our sales and marketing organization is
comprised of approximately 100 professionals. Our field sales force of approximately 80 representatives is promoting Sumavel DosePro primarily to neurologists and other key prescribers of migraine medications, including headache clinics and headache
specialists. Our promotional efforts are complemented by our collaboration with Astellas and approximately 400 of its sales representatives, who are promoting Sumavel DosePro primarily to primary care physicians, OB/GYNs, emergency medicine
physicians and urologists in the United States. We also have entered into a partnership for Sumavel DosePro with Desitin Arzneimittel GmbH, or Desitin, to accelerate development and regulatory approvals in Europe and further enhance the global
commercial potential of Sumavel DosePro.

Sumavel DosePro has demonstrated consistent monthly growth in
total prescriptions since its launch in January 2010. The product continues to add new and repeat prescribers in both the neurology and primary care settings, including a significant number of prescribers who had not prescribed needle-based
sumatriptan injection in the prior 12 months. The product is gaining use from a range of patient segments, including new triptan users, patients being converted to the product from other migraine drugs and patients who have been prescribed
Sumavel DosePro and also have other triptan prescriptions. Since its launch, 77% of all patient conversions to Sumavel DosePro have come from patients with prescriptions for oral triptans, including tablets and melt formulations. (Source® Lx PTA January 2010  August 2010). Through our ongoing efforts with the largest commercial health
plans, Sumavel DosePro is achieving broad coverage in the United States, with a reimbursement claims approval rate of approximately 78% since launch (Source® Dynamic Claims January 2010  August 2010). Total gross sales of Sumavel DosePro through September 30, 2010 were $16.4 million. For the same period, we
recognized $11.8 million in net product revenue from these sales, represented by more than 21,800 aggregate dispensed prescriptions. Weekly prescribing data shows that more than 5,600 physicians have prescribed Sumavel DosePro. (Source® PHAST Retail January 2010 - September 2010 and Source® LaunchTrac week ended January 15, 2010 - week ended October 1, 2010)

enhance the release profile of hydrocodone to provide consistent 12-hour pain relief relative to existing immediate-release combination formulations. Most marketed hydrocodone
products contain the analgesic combination ingredient acetaminophen, which if taken in high quantities over time can cause liver toxicity. ZX002, if approved, may represent the first available controlled-release version of hydrocodone
and also the first hydrocodone product that is not combined with another analgesic. As a result, we believe ZX002 could generate sales from both patients who are using immediate-release opioid products on a chronic basis and patients
already using extended-release opioids. We initiated the Phase 3 clinical development program for ZX002 in March 2010 and, if successful, expect to submit a New Drug Application, or NDA, with the FDA by early 2012. We in-licensed exclusive U.S.
rights to ZX002 from Elan in 2007.

The American Pain Society estimated in 1999 that 9% of the U.S. adult
population suffers from moderate to severe non-cancer related chronic pain. Chronic pain can be treated with both immediate-release and extended-release opioids. We define our target market for ZX002 as prescription, non-injectable
codeine-based and extended-release morphine-based pain products. This market generated U.S. sales of approximately $13.0 billion for the 12 months ended June 2010, based on average wholesale price, on approximately
202 million prescriptions. During the same period, existing hydrocodone products, the most commonly prescribed pharmaceutical products in the United States, generated $3.1 billion in sales on approximately 126 million
prescriptions. (Source® PHAST Retail). We believe ZX002 has the potential to be an important therapeutic
alternative to existing hydrocodone products, including the branded product Vicodin and its generic equivalents.

Our
DosePro technology is a novel, patent-protected, needle-free drug delivery system designed for self-administration of a pre-filled, single dose of liquid drug. We believe the FDAs approval of Sumavel DosePro represents an important validation
of the technology. Results from our pre-clinical and clinical studies demonstrate that DosePro can be used successfully with small molecules and biological products, including protein therapeutics and monoclonal antibodies. We are building our
internal product pipeline by investigating proven drugs that can be paired with DosePro to enhance their benefits and commercial attractiveness. Specifically, we have initiated pre-clinical development on a proprietary long-acting formulation of an
injectable central nervous system, or CNS, drug product and are also evaluating the market potential, formulation requirements and clinical development pathway of an additional CNS compound that could be paired with DosePro to enhance its commercial
attractiveness. If these efforts are successful, we may be able to submit an Investigational New Drug Application, or IND, for one or both product candidates in 2011. We are also seeking to capitalize on our DosePro technology by out-licensing it to
potential partners enabling them to enhance, differentiate or extend the life cycle of their proprietary injectable products.

Investment Highlights

We believe we are differentiated by the unique characteristics of our marketed product and late stage product candidate, each of which addresses large market opportunities, as well as our established
commercial infrastructure, our innovative technology and the depth of experience of our management team. The following represents the key attributes that help differentiate our company:



Fully-integrated pharmaceutical company with established commercial infrastructure. We have a sophisticated and robust
commercial infrastructure relative to many companies of similar size and stage of development in the pharmaceuticals industry. Our sales and marketing organization is comprised of approximately 100 professionals, including a field sales force of
approximately 80 representatives who are focused exclusively on the promotion of Sumavel DosePro. Our field sales representatives have an average of 12 years of prior experience promoting pharmaceutical products and most have prior experience in the
neurology and/or migraine space. In addition, our sales managers have on average 19 years of pharmaceutical industry experience, including an average of eight years of sales management experience.

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

Sumavel DosePro, a differentiated new entrant in the migraine market that has demonstrated consistent monthly prescription growth since its
launch. Our first commercial product, Sumavel DosePro, was launched in January 2010. We believe it represents a valuable new migraine treatment option that will address the significant unmet medical needs of patients and
physicians. Through our own sales force and our collaboration with Astellas, we have a combined network of more than 475 sales representatives detailing both primary care physicians and specialists who are key prescribers of migraine therapeutics.
To date, we have seen consistent growth in adoption of Sumavel DosePro by physicians and patients alike, with more than 5,600 prescribing physicians as of the week ended October 1, 2010, of whom a growing proportion are now repeat-prescribers.
Monthly prescriptions of Sumavel DosePro have grown from less than 250 in January 2010 to more than 3,500 in September 2010.
(Source® PHAST Retail January 2010  September 2010 and Source® LaunchTrac week ended January 15, 2010  week ended October 1, 2010). Sumavel DosePros initial acceptance
by third-party payors has also been encouraging, with approximately 78% of reimbursement claims submitted for Sumavel DosePro being approved since its launch (Source® Dynamic Claims January 2010  August 2010).



ZX002, a novel, controlled-release chronic pain therapy in Phase 3 clinical development. ZX002 has the potential to be
the first approved single-entity, controlled-release formulation of hydrocodone, the most widely prescribed pharmaceutical product in the United States. ZX002 utilizes Elans proprietary SODAS delivery system, which serves to enhance the
release profile of hydrocodone to provide consistent 12-hour pain relief relative to existing immediate-release formulations. In March 2010, we initiated our Phase 3 development program for ZX002 and expect to begin to receive top-line data
from our Phase 3 clinical trials in the second half of 2011.



Validated, proprietary DosePro technology with broad range of potential applications. Sumavel DosePro, which utilizes our
DosePro technology, is the first drug product approved by the FDA which allows for the needle-free, subcutaneous delivery of medication. We believe that DosePro has the potential to become a preferred delivery option for patients and physicians for
many medications beyond sumatriptan, including small molecules and biologics, and are evaluating further internal development candidates and technology out-licensing opportunities. We and the predecessor owners of the DosePro
technology have invested significant resources over a 10 year period in evaluating potential applications of DosePro and optimizing the design, manufacturing and versatility of this technology. Our DosePro technology is covered by 61 issued U.S. and
foreign patents, which are expected to expire on various dates from 2014 through 2023, and 31 pending patent applications.



Experienced management team with unique commercial and development expertise, including CNS sales and marketing
experience. Our management team has a proven clinical, regulatory, business development and commercialization track record at Zogenix and prior organizations, as well as significant expertise in CNS disorders and pain. Our
executive officers and key employees have an average of 20 years of experience in the pharmaceutical, financial and commercial sectors. Prior to Zogenix, members of our management team had success in developing, achieving regulatory approval for and
commercializing multiple product candidates at their former employers. In particular, our CEO and our Vice President of Sales and Managed Markets participated in the successful launch and market defense of GlaxoSmithKlines, or GSKs,
Imitrex, the first triptan to be commercialized in the United States. At Zogenix, our team has successfully acquired, developed, obtained regulatory approval for and launched the commercial sale of Sumavel DosePro and completed a significant primary
care co-promotion agreement in the United States for the product. It also completed an in-licensing transaction and initiated Phase 3 development for our ZX002 product candidate.